EU report hits guarseed market

Guarseed futures and spot prices fell sharply on Wednesday after a European Union (EU) report said that quality checks on guargum exports in India were not adequate to prevent contamination.

EU had sent an inspection team last year in October, when one of the shipments to Europe was found to have pesticides. Guargum is a finished product made of guarseed.

According to traders, prices of guarseed may decline by around Rs 100 a quintal in the short-term. "Guarseed is trading at higher levels usually seen in April-May. But the EU report will have its negative impact on guarseed market," said Navratan Daga, a Bikaner-based guarseed trader.

The country is a major grower of guarseed. The peak season for guargum exports is February-April, and this year too, demand is no less. A rough estimate puts the exports at 130,000 tonnes since November last year, where as the total annual exports is close to 240,000 tonnes.

Commodity analysts at Angel Commodities said, "The report will have negative bearings on the guarseed market in the short-term. However, as the overall scenario in gaurseed is bullish, market will bounce back."

Daga said that the country being a major exporter of guargum, overseas buyers would ultimately have to fall back on India for their requirements.

In Jodhpur, the main delivery centre, spot rates were reported to have slipped to Rs 1,940 a quintal. Traders expected the prices to drop below Rs 1,900.

In Rajasthan, supply of guarseed for millers is less than their crushing capacity as stockists are holding their stocks. Commodity analysts said that against the crushing capacity of 20,000 bags (each of 100 kg), stockists had released around 12,000 bags.

"This is offering support to prices at higher levels," they said.

However, they added that the EU report was likely to press the panic button and stockists might increase the supply.

"For the April contract, Rs 1,979 a quintal is being seen as a good support. But if this level is breached, the futures may fall down to Rs 1,930 a quintal," said commodity experts.

On the National Commodity and Derivatives Exchange, the April contract of guarseed closed the day on Wednesday at Rs 1,988 a quintal, down Rs 50. Similarly, guargum futures dipped by Rs 105 a quintal to Rs 4,821 a quintal.