Guar gum contracts continued an upward circuit for the fifth day on Friday on strong fundamentals, supported by upbeat export demand. So much so that the Forward Markets Commission (FMC), the commodity markets regulator, again raised trade requirements, to dampen the race.
The commodity is used as a thickening and binding agent in the food, textiles, paper and pharmaceutical sectors, and in the oil industry for drilling of crude oil.
The commodity for delivery in January and February surged to a new closing record of Rs 31,783 a quintal and Rs 32,272 a qtl, respectively. Following suit, guar seed hit the upper circuit, ending the day at Rs 9,604 a qtl, Rs 9,748 a qtl and Rs 9,867 a qtl for delivery in January, February and March, respectively.
In 2011, the price of guar seed has risen 211 per cent and of guar gum by 290 per cent, despite the levy of special cash margins on long positions in guar futures. Late last month, the FMC the trade margin to 30 per cent, followed by a drastic reduction in member and client trading positions. On Friday, it raised the margins to 40 per cent from 30 per cent and converted all non-cash margins of 15 per cent so far into cash margins only, effective from Monday. The trade margin of 40 per cent is above the initial margin of 13 per cent. The total margin of 53 per cent is the highest ever for any agri commodity.
To maintain the status of commodity exchanges as a proper price discovery tool and to avoid any possibility of manipulation, investigating teams of FMC and NCDEX have been checking books of accounts of many traders in Jodhpur, Jaipur and other trading centres. It has issued showcause notices to five leading traders, in which margin funding and other irregularities were allegedly discovered. These traders were called to appear before the FMC yesterday.
Against the total estimated output of 1.5 million tonnes (mt) last year, the guar seed crop size is forecast to remain at 1.25 mt this year. With little carryover stock left from last year, the commodity is expected to remain in short supply this season. India supplies 97 per cent of global demand, through export of 400,000 tonnes of guar gum. The guar seed deficit is presently estimated at 20 per cent.
A report quoted Lucid Colloids’ managing director, Uday Merchant, as saying, “This is perhaps the worst-ever shortage of guar in India. In 2012, we will, for the first time, absolutely run out of stock.” Lucid contributes about a fifth of India’s export.