 "Dreams of guar riches fade in Rajasthan")
Bhola Ram, a farmer from Bhandhu Khedi in Jodhpur, Rajasthan, is in a sticky situation. The 45-year-old farmer cultivates guar, a cash crop. Guar gum, which is used in shale gas exploration, is produced from guar seeds. Ram used to get good returns on his produce, as there was a huge demand from gum manufacturers. But, what worries him is that in 2013, the demand for his crop has plummeted. When things were good during 2007 to 2012, Ram, who used to cultivate guar in two acres, scaled it up to about six acres. With few takers, he is sitting on a stock of about 20 quintals of guar beans which he had saved for selling in the lean season.
"Till last year, I could get even up to Rs 30,000 for a quintal of guar seed. But, this year, the prices have not even reached Rs 6,000, although the period between October and December is the peak season for guar trade," the farmer says. Having burnt his fingers, Ram says he would be "careful" in the future.
According to the Rajasthan government, guar seed was grown in about 3.5 million hectares in 2013. The state contributes to about 80 per cent of the total guar production in the country. As the crop fetched handsome returns, more and more farmers started growing guar. The state's guar seed production shot up from 1.26 million tonnes in 2008-09 to 2.02 million tonnes in 2012-13 - an increase of about 61 per cent. The crop is sown in August and harvested in October.
Ram's dilemma is shared by Prakash Mal Jain of Nutritious Agro Food, a Jodhpur-based guar gum manufacturer and consultant. Jain set up two processing units, each with 10-tonne capacity. However, with orders drying up, he has been forced to shut down one unit and is running the other in reduced capacities. "We operate the unit only when there is an order. We failed to read the market correctly and hoped that good times will continue for long," says he. Jodhpur is the main centre for guar trade in the country. There are about 250 processing and gum-making units in the two main industrial estates of Marudhara and Boranada, most of which are staring at an uncertain future.
"Fresh demand is drying up as guar gum buyers are looking for cheaper alternatives," says Jain. He says in many cases farmers too are reluctant to sell their produce as they believe that prices would again reach the astronomical highs seen last year.
Good going
It was around 2005-06 that guar gum started getting the attention of both domestic and international players because of its new-found usage in shale gas exploration where it was used it for a process called fracking. From a low of around Rs 2,000-2,500 per quintal, all of a sudden guar seeds became a priced commodity peaking at Rs 26,000-30,000 per quintal in 2012-13.
High profits attracted more and more players into the trade, and in no time the number of processing units increased from 50-60 to about 500 in the state. "Around the same time, the Boranada industrial area was being set up. So, manufacturers who wanted to expand their trade and new entrants shifted their operations to Boranada," says Bheru Jain, CEO of Rajasthan Gum.
At hindsight, Jain thinks expanding capacity was not a good decision. "We hoped that the shale gas industry will continue to maintain its demand for the next four-five years. It seems the boom is showing signs of tapering off," he says. According to him, units which have a capacity to crush around 10,000 tonnes of guar seeds per day are processing, on an average, just 2,500 tonnes a day.
What threatens to end the party for the farmers and traders alike? PK Hissaria, managing director of Sunita Hydrocolloids and president of Indian Guar Gum Manufacturers Association, says cheap thickening agents from China should be blamed for Indian traders' plight. "Carboxymethyl cellulose (cellulose gum) and xanthan gum-which like guar gum were earlier used only in food items-have found their way into the crude oil industry as well," Hissaria says. He says though these alternatives are priced on a par with guar gum or slightly more, the scenario could change in the future when their supply increases. This will lead to a further drop in the demand for Indian gum, signs of which are already visible as international buyers are no longer willing to quote a high price for it.
"It's not that guar trade will come to a close, as most of the new units and expansions were funded by internal accruals, but this churning will remove the grain from the chaff," he says.
Road ahead
Guar gum exports surged from Rs 2,938.70 crore in 2010-11 to Rs 21,287 crore in 2012-13, mainly due to a strong demand from gas exploration companies in the US and Europe. It even upstaged Basmati rice as India's largest farm export. But thereafter came the crash: in the first four months of 2013-14, India exported around 0.21 million tonnes of guar gum for Rs 5,729.24 crore. During the same period last year, exports were around 0.16 million tonnes and worth Rs 12,651. This shows a whopping 55 per cent drop in value.
Hissaria says the industry needs to restructure and look for alternative usages of guar gum, apart from its traditional use in the food industry. For farmers too, there are very few crops which give high returns like guar, he adds.
"The cost of producing a quintal of guar is around Rs 8,000 and if we get only Rs 5,000-6,000 a quintal, we might gradually shift to other crops like moong," says SR Mirdha, another farmer from Bhandhu Khedi. However, the processors and traders disagree with the perception. "Guar is still a lucrative crop for growers as no other crop gives you a price of Rs 5,000-5,500 per quintal. Though prices have softened this year, they are still better than what they used to be four-five years ago," says JP Saraswat, a commission agent of Dalal Shakti Trading Company in Jodhpur's biggest guar mandi in Bhagat Ki Kothi.
THE GUAR GUM TRADE
STAGE 1: Farmer sells guar seed in mandis to processing units
STAGE 2: Processing units make gum or splits from the seeds
STAGE 3: The byproduct of this processing is called guar 'churi or korma' and is high-value cattle feed
STAGE 4: The guar gum produced from this processing is then used as raw material for making guar powder
"Till last year, I could get even up to Rs 30,000 for a quintal of guar seed. But, this year, the prices have not even reached Rs 6,000, although the period between October and December is the peak season for guar trade," the farmer says. Having burnt his fingers, Ram says he would be "careful" in the future.
According to the Rajasthan government, guar seed was grown in about 3.5 million hectares in 2013. The state contributes to about 80 per cent of the total guar production in the country. As the crop fetched handsome returns, more and more farmers started growing guar. The state's guar seed production shot up from 1.26 million tonnes in 2008-09 to 2.02 million tonnes in 2012-13 - an increase of about 61 per cent. The crop is sown in August and harvested in October.
Ram's dilemma is shared by Prakash Mal Jain of Nutritious Agro Food, a Jodhpur-based guar gum manufacturer and consultant. Jain set up two processing units, each with 10-tonne capacity. However, with orders drying up, he has been forced to shut down one unit and is running the other in reduced capacities. "We operate the unit only when there is an order. We failed to read the market correctly and hoped that good times will continue for long," says he. Jodhpur is the main centre for guar trade in the country. There are about 250 processing and gum-making units in the two main industrial estates of Marudhara and Boranada, most of which are staring at an uncertain future.
"Fresh demand is drying up as guar gum buyers are looking for cheaper alternatives," says Jain. He says in many cases farmers too are reluctant to sell their produce as they believe that prices would again reach the astronomical highs seen last year.
Good going
It was around 2005-06 that guar gum started getting the attention of both domestic and international players because of its new-found usage in shale gas exploration where it was used it for a process called fracking. From a low of around Rs 2,000-2,500 per quintal, all of a sudden guar seeds became a priced commodity peaking at Rs 26,000-30,000 per quintal in 2012-13.
High profits attracted more and more players into the trade, and in no time the number of processing units increased from 50-60 to about 500 in the state. "Around the same time, the Boranada industrial area was being set up. So, manufacturers who wanted to expand their trade and new entrants shifted their operations to Boranada," says Bheru Jain, CEO of Rajasthan Gum.
At hindsight, Jain thinks expanding capacity was not a good decision. "We hoped that the shale gas industry will continue to maintain its demand for the next four-five years. It seems the boom is showing signs of tapering off," he says. According to him, units which have a capacity to crush around 10,000 tonnes of guar seeds per day are processing, on an average, just 2,500 tonnes a day.
What threatens to end the party for the farmers and traders alike? PK Hissaria, managing director of Sunita Hydrocolloids and president of Indian Guar Gum Manufacturers Association, says cheap thickening agents from China should be blamed for Indian traders' plight. "Carboxymethyl cellulose (cellulose gum) and xanthan gum-which like guar gum were earlier used only in food items-have found their way into the crude oil industry as well," Hissaria says. He says though these alternatives are priced on a par with guar gum or slightly more, the scenario could change in the future when their supply increases. This will lead to a further drop in the demand for Indian gum, signs of which are already visible as international buyers are no longer willing to quote a high price for it.
"It's not that guar trade will come to a close, as most of the new units and expansions were funded by internal accruals, but this churning will remove the grain from the chaff," he says.
Guar gum exports surged from Rs 2,938.70 crore in 2010-11 to Rs 21,287 crore in 2012-13, mainly due to a strong demand from gas exploration companies in the US and Europe. It even upstaged Basmati rice as India's largest farm export. But thereafter came the crash: in the first four months of 2013-14, India exported around 0.21 million tonnes of guar gum for Rs 5,729.24 crore. During the same period last year, exports were around 0.16 million tonnes and worth Rs 12,651. This shows a whopping 55 per cent drop in value.
Hissaria says the industry needs to restructure and look for alternative usages of guar gum, apart from its traditional use in the food industry. For farmers too, there are very few crops which give high returns like guar, he adds.
"The cost of producing a quintal of guar is around Rs 8,000 and if we get only Rs 5,000-6,000 a quintal, we might gradually shift to other crops like moong," says SR Mirdha, another farmer from Bhandhu Khedi. However, the processors and traders disagree with the perception. "Guar is still a lucrative crop for growers as no other crop gives you a price of Rs 5,000-5,500 per quintal. Though prices have softened this year, they are still better than what they used to be four-five years ago," says JP Saraswat, a commission agent of Dalal Shakti Trading Company in Jodhpur's biggest guar mandi in Bhagat Ki Kothi.
THE GUAR GUM TRADE
STAGE 1: Farmer sells guar seed in mandis to processing units
STAGE 2: Processing units make gum or splits from the seeds
STAGE 3: The byproduct of this processing is called guar 'churi or korma' and is high-value cattle feed
STAGE 4: The guar gum produced from this processing is then used as raw material for making guar powder