Indian commodities

Guar gold rush now coming to a halt

By RJ Whitehead

- Last updated on GMT

Guar gold rush now coming to a halt
All signs indicate that India’s guar gum industry’s stellar year is on the wane, according to a new industry report.

"We view the current cycle as a turning point for the Guar Gum industry in India​," said Javed Matin, chief analyst of Three Headed Lion. 

Guar gum is extracted from guar seed, the production of which is expected to be 140,000 tonnes this year—slightly lower than 170,000 tonnes in 2011-12. 

The commodity—of which 80% of the world’s production comes from India—recently emerged as India's top farm export, overtaking traditional heavyweights rice and cotton, and looks likely even to move into the top 10 of all exports.

Exports slowing

According to the latest government data, guar gum exports have increased nearly 139% year on year, with shipments of around US$4.9bn between April 2012 and this January. While this represents a significant figure, in relation to the previous year’s growth of 374%, exports have definitely been slowing.

"There is a sense that the guar gum gold rush is over. Even after a short rally last December, prices of guar seed and guar gum have been relatively stable during the first quarter of this year, but there are signs of downward pressure on prices​," explained Matin, who added that several unknowns could have a significant impact to the stability of the guar market.  

The opaque nature of guar gum’s supply chain in India means it is a tough call to predict pricing and supply trends. “Companies must still be wary and ask the right questions to avoid surprises​,” said Matin.

Claims of cartelisation

The industry has been wracked by claims of cartelisation over the last year, with India’s commodity market regulator, the Forward Markets Commission (FMC) promising a decision on the launch of a guar future contract by the end of last month. That has so far been unforthcoming. 

In March 2012, the FMC banned futures trading in guar seed and guar gum to curb price volatility and speculation, and has recently called for a probe by the Competition Commission of India into whispers of price fixing by the few influential players in the business.

The FMC banned guar futures when spot prices were Rs26,000 a quintal; although, after the ban, prices continued to increase, to Rs32,000, and remained at elevated levels for three months.

The issue of cartelisation in the trade of guar gum is under consideration​,” corporate affairs minister Sachin Pilot, told parliament recently.

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