With the rush to sow guar seed owing to its huge price surge over the past year, there is also an apprehension of over-supply and prices slumping in the coming harvesting season.
Enter Vikas WSP, a Sriganganagar (Rajasthan) — based guar gum processor and exporter It has signed guar seed procurement contracts with around 225,000 farmers in the region, with a minimum price guarantee at Rs 50 a kg for the harvested crop.
Though this is less than a sixth of the current price in local mandis, yet enthusiastic farmers signed the contract. For, they get the assurance of a benchmark price which is 60-70 per cent higher than the cost of cultivation. Farmers will be free to sell seeds in the open market if prices at the time of harvesting are higher.
Guar seed and its derivative, guar gum, have seen prices shoot up 1,000 per cent during the past year. As happens with all agri commodities in such cases, sown area is expected to swell; there is anticipation of a 50 per cent increase in both area and output. This could also mean a glut, falling prices and distress sales.
“The guar seed price appreciation started with Rs 40 a kg during the last season. Hence, we fixed a minimum guaranteed price at Rs 50 a kg. Even in a distress sale, farmers would avoid sale at a price below this level,” said B D Agarwal, managing director.
Adding: “We are the largest guar seed crushing company in the region. Hence, even if farmers sell to others, including intermediaries, the commodity would come to us only. The MSP guarantees a minimum return.”
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Guar seed (India, particularly Rajasthan, produces much of global supply) is considered cattle feed and hence, the government does not announce a minimum support price for it. In the absence of any benchmark, the price moves with abnormal volatility. During the peak harvesting season, traditionally, this cattle feed is sold at a throwaway price; during the lean season, it jumps through the roof. Its prices rose sharply last year because the final product, guar gum, was needed in the oil exploration business (and there were supply fears, as output was less than the year before).
Guar splits and gum powder are processed to make various derivatives for use in the petroleum, textile, paper, food and pharmaceutical industries, among others.
Agriculture ministry data showed guar seed output at 1.25 million tonnes in 2011, about a fifth lower than the 1.5 mt the previous year. This year, output is estimated at 1.8 mt. The sowing begins towards the end of July, for harvesting in November. It is usually a 90-day, rain-fed monsoon crop, requiring eight to 15 inches of rain in three to four spells. For effective guar cultivation, the crop needs two rain spells before sowing, one when the crop buds out and another when it comes up well and blossoming starts. Then it requires plenty of sunshine and dry weather to come up really well. During harvesting, it again needs good sunshine, to dry and become usable for industries.
Encouraged by last year’s realisation, Vikas WSP has distributed 3,000 tonnes of seed worth Rs 92 crore to 225,000 farmers, to cover around 500,000 ha of sowing area this season. Last year, the company had distributed around 800 tonnes of seed worth around Rs 2 crore.
“This is a good beginning for a small commodity like guar seed,” said Atul Shah, chief executive officer of Emkay Commodities.
Guar seed in the spot Sriganganar mandis is quoted at Rs 315-320 a kg. In March 2011, the spot price was Rs 27 a kg. Guar gum was quoted at the time in the Bikaner mandis at Rs 84 a kg; it is now Rs 1,100 a kg.
Vikas WSP has a guar seed crushing plant with 250,000 tonnes of installed capacity. It crushed 140,000 tonnes of seed last year. This year, looking at rising exports of guar gum, the company plans to use full capacity.