Nafed's trading interest boosts guar futures

The market buzz that the National Agriculture Cooperative Marketing Federation (Nafed) of India is procuring guar has lifted guar seed and guar gum futures on the National Commodity and Derivatives Exchange (NCDEX) sharply in the last four-five sessions, traders and analysts said.

While the active guar seed March contract has risen nearly Rs 80-100, or 7 per cent, to Rs 1,844 a quintal during the period, the guar gum contract has surged nearly Rs 120, or 5 per cent, to Rs 4,478 a quintal.

The state-run farmers' cooperative has confirmed it bought guar seed from Bikaner, Hanumangarh, Ganganagar, Jaipur, and Jodhpur spot markets over the past few days.

"We have been buying guar seed from the physical market entirely with trading motive. Expectations of higher prices for the commodity in the coming days have prompted us to buy the stocks," BK Yadav, branch manager, Nafed, Ganganagar, said.

"The prices were ruling very low by December-end, giving us good opportunity to trade. If the prices remain attractive, we aim to purchase around 2,000 tonnes of guar seed this season, compared with 1,800 tonnes at around Rs 1,600-1,800 during the same period last year," he said. However, the cooperative may limit its buying to just 1,000 tonnes if the prices surge sharply further.

From December, Nafed has already bought around 750 tonnes of loose quality guar seed at around Rs 1,550, he added.

"At present, we have slightly reduced the buying due to the sudden surge in the prices. But if prices remain in the same range or dips slightly, we will buy the rest of the intended stock (up to 2,000 tonnes)," Yadav said.

In the March contract, the daily average trading volume of guar seed, which was about 35,000 tonnes in the first half of December, surged to 75,000-80,000 tonnes in the second half. In the first week of January, the daily average trading volume has crossed 120,000 tonnes.

During the period From December, open interest also rose sharply.

The daily average open interest in the active March contract, which was around 75,000 tonnes in the first half of December rose to over 130,000 tonnes by the end of the month.

In the last 3-4 trading sessions alone "" of which one was a half-day session on Saturday "" open interest rose a whopping 39,000 tonnes to 170,400 tonnes.

Guar seed prices in the Jodhpur spot market have picked up sharply by over Rs 120 to Rs 1,728.75 a quintal since January 1. In the Bikaner spot market, the prices rose nearly Rs 130 to Rs 1,734.20 a quintal during the period.

Improved buying of guar seed by millers to manufacture 'churi' and 'korma' "" the cheap, protein-rich ingredient for cattle feed "" has also been supporting the rise in prices. Demand for the two products has been increasing of late.

The prices are likely to move up further on expectations of improvement in export demand in the coming days following surging crude oil prices.

Crude oil prices had touched an all-time high of $100.09 on Thursday. A rise in oil drilling is likely to improve India's guar gum exports prospects.

Guar gum, an extract of guar seed, is used as a stabiliser, emulsifier and thickener in foods, textiles, oil drilling, mining, pharmaceuticals, and cosmetics.