The high volatility in guar prices ahead of the peak sowing season raised several eyebrows over the re-launch of its futures trading on commodity exchanges.
With the onset of rainfalls ahead of the actual monsoon season, guar seed sowing has intensified. While the actual sowing data continues to remain a distant dream either from the government or private agencies, experts believe between 15-20 percent of sowing has completed.
But, falling prices in spot and futures market has been a reason for farmers and traders to worry. Guar seed prices for near month contract hit the level of Rs 5700 a quintal early this month before closing with the upper circuit at Rs 7010 a quintal on Friday.
The price fall below the level of Rs 5500 a quintal would lead to farmers diversification to other more remunerative crops including edible oils, pulses and cotton. Vikas WSP, the only listed organized player in guar space had earlier contracted farmers to grow the seed extensively under commitment that the company would buy it at Rs 10,000 a quintal.
But, falling prices of the commodity due to lower export demand of its derivative guar gum forced the company rethink its previous commitment.
Repeated efforts to reach B D Agarwal, managing director of Vikas WSP could not elicit any response. Traders, however, say that the company is no longer a buyer of guar seed resulting into over half of the animal feed’s last year’s output lying with farmers and stockists.
Also, the pre-monsoon showers across the country raised this year’s output prospects of the monsoon irrigated rain-fed crop. Additionally, increased seed arrivals due to a bumper summer harvest in Gujarat have led to a 16% fall in guar prices in the last three weeks.
Purshotam Mundra, partner of Rajendra Prashad Purshotam Mundra, a Jodhpur based guar trader, estimates guar output at 2.75 lakh bags (1 bag = 100 kgs) this year as against 2.25 lakh bags.
According to Sanjay Periwal, another Jodhpur based trader, guar gum demand from overseas is negligible which is pulling down prices of both guar and its derivatives.
Trading in these two commodities is under continuous supervision of the Forward Markets Commission (FMC) and the ministry of consumer affairs. In March 2012, FMC had discontinued futures trading in guar contracts, following price manipulation by several trader groups across the country.
"Currently, there is no bullish or bearish activity in guar counters. The current price fall is purely based on fundamentals. While seed price fell because of excessive supplies, gum faced irregular export orders," said Purushottam Isaria, president of the All India Guargum Manufacturers Association.
While sowing of the winter harvest crop begins in June in most states, in Rajasthan it commences in July.
Isaria said farmers were optimistic of a 25% higher acreage and a proportionate rise in guar seed output this season. He estimates this year's guar seed output at 25-27.5 million bags, against 20-21 million bags last year.
Mundra believes guar gum is being imported by the US on a cautious note. Instead of one-time bulk orders in the previous years, importers have started ordering small quantities.
