• Guar seed and guar gum futures witnessed a range bound trend during peak harvesting season of 2016-17 (Oct’16 to Sep’17) tracking balanced supply demand situation during the year.

• Prices staged a strong rally from Jan onwards on robust domestic and overseas demand wherein guar seed prices moved up by 23% since start of Jan’17 till mid-April wherein gum prices gained about 34% during same time period.

• Prices could not sustain its gains and witnessed selling pressure from May onwards as higher stocks at physical market and concern over GST implementation on guar meal prompted speculators to cut long positions at futures platform.

• Guar futures resumed its uptrend in July on heightening concerns over sowing delay amid crop failure caused by uneven distribution of monsoon rainfall in western Rajasthan.

• Guar cultivation is mainly concentrated in Indo Pakistan subcontinent where India Pakistan contribute about 95% of total world production together.
• India is the largest guar producer accounting for more than 80% of global production of guar. Semi-arid region of western Rajasthan is quite conducive to guar cultivation making Rajasthan largest guar producing state followed by Gujarat, Haryana and Punjab.
• In Rajasthan, guar cultivation is concentrated in 10 districts namely, Bikaner, Barmer, Ganga nagar, Hanumangarh, Jaisalmer, Churu, Jodhpur, Nagaur, Sikar and Jhunjhunu  which accounted for 88% of the production and 92% of the acreages.

• Guar acreage in India witnessed downtrend in last six years tumbling by 6%. Shrinking export demand of guar gum amid squeezing profit margin prompted farmers to switch to other profitable crops.
• Guar acreages for year 2017-18 has shrunk to its lowest level in last six year and estimated at 35.41 lakh hectares, lower by 16% Y/Y, as per government official data.
• As per industry sources, impact of lower acreage is likely to be seen on over all production which is expected to fall substantially across India. However, government’s advance estimates reports depict different story as Rajasthan government raised its  production forecast from 14.24 lakh tonnes to 16.76 lakh tonnes for year 2017-18.
• However, production is expected to fall in Gujarat and Haryana by 40% and 3% respectively on account of lower acreage. Guar acreages in Gujarat is estimated at 2.01 lakh hectares for the year 2017-18, lower by 43% Y/Y whereas it dropped by 23% Y/Y in Haryana. Guar acreage in Rajasthan has tumbled by 13% Y/Y to 31.0 lakh hectares, as per Rajasthan Agricultural ministry.

• Production of guar in India is determined mainly by rainfall during the monsoon season, any delay or inadequacy in the monsoon hampers sowing and affects the production level.
• Western Rajasthan witnessed uneven distribution of monsoon rainfall in the year 2017 where cumulative monsoon rainfall for western Rajasthan recorded was 39% of LPA by end of Sept. major guar growing districts like Ganga Nagar, Hanumangarh, Bikaner and Churu experienced below normal monsoon rainfall wherein Barmer, Jaisalmer and Jodhpur witnessed above normal rainfall during time period of 1st June to 30th Sept.
• Sowing activities: As per KCTL Research survey most of the early sown guar crop (sown in Aril 2nd and 3rd week) were in good condition in Ganganagar, Hanumangarh district where 70% of crop  is largely dependent on irrigation wherein rest 30% crop is rain-fed. Most of the crop in Ganganagar and Hanumangarh were ready for harvest in second week of Sept wherein late sown crop (sown in 2nd and 3rd week of May) were in depressed condition due to lack of rainfall. Cumulative yield for Hanumangarh and Ganganagar is likely to be lower compared to last year due to lack of precipitation at the time of pod development stage and may stand near about 2.5 quintal/ bigha (3.5 Bigha = 1 hectare)
• In spite of substantial rise in guar acreages in Churu, production levels are likely to be lower due to deficit monsoon rainfall as most of the guar crop in Churu is rainfed. As per Rajasthan government official, guar acreage in Churu is estimated at 3.367 lakh hectares, higher by 61% Y/Y.
• On a contrary, above normal rainfall flowering stage hampered crop progress in Barmer and some part of Jaisalmer and overall yield is likely to impacted negatively in these district.

• Being a largest guar gum exporter, India enjoys its monopoly in global market contributing more than 80% in total export of guar gum. USA accounts for more than 60% of total guar gum import from India followed by China, Germany and Russia. India exported about 4.23 lakh MTs of guar during year 2016-17 (Apr’16- Mar’17), higher by 30% Y/Y.
• India has exported about 1.77 lakh MTs till July of year 2017-18 started with Apr’17, higher by 69% Y/Y for corresponding period of last year and expected to improve further in November and December as per export seasonality Index based on last 9 year guar gum export from India.
• Export to US is likely to improve further in view of increasing crude and shale gas production as US accounts for more than 70% of guar export from India. Guar gum emerged as best emulsifier for hydraulic fracturing technique used in shale gas and oil exploration in US. Supply restriction of crude from OPEC nations and Russia is likely to support crude oil prices in coming months which is likely to be beneficial for oil drillers in US. The shale oil and gas sector has been the largest user industry, accounting for about 90 per cent of total guar gum produced in India
• Expanding size of  guar processing industry in China  is likely to keep export supply higher from India. China has the largest technically recoverable shale gas resources in the world. The country aims to increase its shale gas production from the current level of 1.3 billion cubic meters to 30 billion cubic meters by year 2020. This is likely to have a positive impact on the demand for guar products from India in the next few years.
• Apart from US and China, guar gum import is expected to improve in Canada and Germany in line with increasing global shale gas production as well as different industrial uses.

• Total guar supply for year 2017-18 is likely to be lower by 36%  compared to last year owing to substantial fall in production, which was result of fall in total acreage amid lower yield. Based on the market survey, KCTL expects guar production for the year 2017-18 may tumble by 33% and likely to stand near about 6 lakh tonnes. Remarkable fall in production in Rajasthan may keep overall production lower in the year 2017-18.
• Domestic demand of guar derived products is likely be lower in current year. Demand in food and textile industry may shift to other alternative products due to higher prices of gum. However, meal demand is likely to improve due to its higher nutritional value. KCTL research estimates total domestic consumption of guar for year 2017-18 at 2 lakh tonnes, lower by 17% Y/Y.
• Export is forecast to improve by 1% and is pegged at 15 lakh tonnes as improving oil drilling activities in US is likely to impact overall export positively.
• Impact of lower production is likely to be seen on inventory level which is likely to drop substantially by 80% Y/Y to  2.7 lakh tonnes in year 2017-18.

• Weaker supply prospects for guar would be the major reason to keep prices higher in long term. Production is expected to fall substantially in Rajasthan, Haryana and Gujarat.
• The marketing year 2017-18 will be starting with 38% Y/Y lower carry forward stock as sell off was witnessed in the year 2016-17 due to implementation of GST and production in the upcoming season is estimated to fall by 33% and both these factors are likely to push up the prices.
• Rajasthan government is procuring the oilseeds and pulses at MSP, which might prompt the farmers to delay supply of guar seed to the market. Besides, farmers are likely to hold back the stocks in anticipation of better price realization.
• Guar gum export are likely to increase in the year 2017-18 in line with improving crude oil prices. Better outlook for crude oil prices may lead to rise in oil rigs counts in US. Rising import of guar gum split from China is also likely to support the  prices in coming months.
• Beside, improving demand of guar meal is also likely to support prices in near term as Guar meal has emerged as one  of the major protein supplements in the cattle feed industry.

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