guar update oct2016
TRANSCRIPT
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Agri-Commodity Update – Guar
Friday, October 07, 2016
Guar prices recovered in second half but new season
arrivals and limited export demand may pressurize
prices at higher levels
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Prepared by Ritesh Kumar Sahu Analyst - Agri Commodities [email protected] (022) 2921 2000 Extn. 6165
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Agri-Commodity Update – Guar
Friday, October 07, 2016
Price Performance
Guar seed prices touched its lowest levels in five years
(below Rs. 3,000 per quintal) in 2016. Similarly, the prices
of guar gum too slipped below Rs. 5,000 per quintal levels
for the first time since November 2010. Subdued demand
from the United States, China and Canada in the past
couple of years is the main reason behind the falling of
guar complex prices significantly. Moreover, Guar exports
from the country, down considerably in last two year (2015
& 2016) compared to previous year (2014).
In the current year, guar prices fall during the first quarter
however recovered during the second and third quarter.
Higher new season arrivals coupled with steady domestic
demand and limited export demand pressurized prices
during first quarter. However, during second, the major
factors influencing the price rise was lower supplies and
expectation of lower sowing in the largest guar producing
state, Rajasthan. Farmers were not willing to sell guar seed
at lower levels during the second quarter of the year while
reports of drastic decrease in guar acreage during the next
season supported prices during the third quarter. The rise
in price is also helped by the demand for churi-corma (by
product of guar seed), used in high protein animal feed.
In the third quarter, guar seed price on National
Commodities Derivative Exchange (NCDEX) have been
quite volatile trending down during the month of July –
August and then recover during September. The recovery
in prices is due to improved exports and lower sowing area
across the country. However, prices have dropped during
-5.2
0.6
12.2
-16.0
5.2
17.6
-20
-10
0
10
20
Q1 Q2 Q3
Guar Complex - Quartly price Change (%)
Guarseed Guargum
last week of September due to reports of good yield in
Rajasthan despite lower acreage. Moreover, higher stock
levels from the last 2 years with traders and stockists also
kept occasional pressure on guar complex. Moreover,
lower export demand from the country and above normal
rains forecast in the guar sowing regions by the Indian
Meteorological Department (IMD) also kept the prices
under control.
In the monthly chart for 2016 above, Guar seed and gum
prices were higher during April 2016, due to recovery in
exports and domestic demand for guar churi and korma,
used as cattle and poultry feed, increases due to high
soybean meal prices. The prices improved in July on
reports lower acreage in Rajasthan. The area under guar
also pegged down by almost 15 per cent 39.3 lakh
hectares from 46.25 lakh hectares.
The price of Guar gum is lower this year compared to last
two years due to slack demand from the drilling
5200
5500
5800
6100
6400
6700
7000
3000 3100 3200 3300 3400 3500 3600 3700
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Sep
-16
Guar Seed (LHS)
Guar Gum (RHS)
Source: NCDEX, Angel Commodity
Average monthly Guar Seed and Gum Prices -
3000
3500
4000
4500
5000
5500
6000
Jan
Feb
Mar
Ap
r
May
Jun
Jul
Au
g
Sep
Oct
No
v
De
c
Y 2014 Y 2015 Y2016 Source: NCDEX
Yearly price comparison of Guar Seed- (Rs/Quintal)- NCDEX
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Agri-Commodity Update – Guar
Friday, October 07, 2016
companies in the US as crude oil prices were lower. The
other reason of lower prices as International buyers look
for cheaper alternatives, such as tara gum, locust bean
gum and xanthan gum, which are being used in the food
industry.
Synthetic polymers have substituted in the shale oil and
gas industry as environment friendly - guar gum prices
have surged higher and crude oil prices touching
multiyear lows. These guar substitutes in food industries
and oil extractions coupled with higher carryover stocks
in the country keeping prices multi-year lower in current
year.
Production estimates
Rajasthan is the leading producer, contributing 80 per
cent of India’s production, followed by Haryana (10 per
cent), Punjab and Gujarat (5 per cent each). The major
guar-growing areas in Rajasthan include the northern
districts of Bikaner, Ganganagar, Hanumangarh and
Churu, and the western belt of Jaisalmer, Barmer and
Jodhpur. Commissionate of Agriculture, Rajasthan has
released its 1st advance estimate recently for kharif
2016-2017 crops. The production estimate for guar seed
in Rajasthan projected at 19.5 lakh tonnes (lt), down 11.7
per cent compared to last year production.
Earlier, Rajasthan government pegged area under guar
seed in the current season 29.83 lakh hectare, down 23
per cent compared to last year area. Thus, the
production during current season expected to be lower
compared to previous year by almost 10-15 per cent.
25
30
35
40
45
50
55
15
17
19
21
23
25
27
29
31
2012-13 2013-14 2014-15 2015-16 *2016-17
Prod (lt) - LHS Area (lakh hac)- RHS
Source: Government of
Guar Production in Rajasthan (lakh Tonnes)
In Haryana, guar seed was cultivated on 261,000 hectares
in the current year until August 2016. However, for 2016-
17, Haryana government has set target of 3 lakh hectares
(lh) and production is targeted at 4.20 lt which may not be
achieve as area dropped by one third of its target.
The third largest producing state, Gujarat has sown guar
seed in 2.24 lh area, down by 34 per cent compared to
last year area. In 2015-16, Gujarat produced about 1.58 lt
of guar seeds with the acreage of 3.42 lh. Thus during the
current year the production may be lower by at least 10-
15 per cent.
In the current year, as the prices of guar seed and gum at
their lowers levels in 5 years, guar farmers in Rajasthan,
Haryana and Gujarat have shifted to better options like
pulses crops – moong and moth in rainfed areas and other
crops like cotton and groundnut crops in kharif season.
During the just concluded monsoon months, rainfall over
Rajasthan recorded above normal by India Meteorological
Department (IMD).
2.78
3.69
3.38
2.83
4.2
30
35
40
45
50
55
2.50
2.70
2.90
3.10
3.30
3.50
3.70
3.90
4.10
4.30
2012-13 2013-14 2014-15 2015-16* 2016-17#
Prod (lt) Area (lakh hac)
Source: Government of Haryana *3rd estimates #target
Guar seed Production in Haryana (lakh Tonnes)
Source: IMD
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Agri-Commodity Update – Guar
Friday, October 07, 2016
For Rajasthan farmers where the rainfall is low, Guar is a
profitable crop as it requires less water and has very low
production cost in terms of fertilizers and pesticide
requirement. However, due to above normal rains this
season and high prices of other alternate crop, farmers have
sown lesser percentage of guar in their lands.
Increasing Arrivals
The arrivals of guar seed in the physical markets have been
higher in the current sesaon compared to last year. Since last
two years, farmers and stockists have stock their guar seed
for the hope of higher price realization. However, the prices
have not improved and we have seen arrivals were during
first four months of 2016 compared to last year arrivals. The
arrivals were lower during May – June 2016 as farmers have
held their stocks due to lower prevailing prices.
As per data from Agmarknet, about 1.70 lt of guar seed
arrival registered in the physical market (mandi) of
Rajasthan, Gujarat and Haryana during April – September
20116, up 10 cent higher than same period for 2015.
Moreover, in 2016 (Jan-Sep), the arrival in top three
producing states recorded, 3.52 lt, higher by 47 per cent
compared to last year.
Decreasing Exports
India mainly produces guar gum, or guar splits made from
guar seed, which further processed into guar gum powder,
exported to different countries in the world mainly for the
0
10000
20000
30000
40000
50000
Jan Feb Mar Apr May Jun Jul Aug Sep
Arrivals of Guar Seed - Last two Years (tonnes) (Rajasthan, Haryana & Gujarat)
2014-15 2015-16 Source- Agmarknet
use of crude oil and shale gas extraction. Guar gum is
mostly consuming in oil & gas industry, accounting for 60-
65 per cent, followed by food (25-30 per cent) and the rest
by pharma. Guar products are used in the textile printing
industry in the domestic market.
Guar complex exports during the current marketing year
(2016-17) may touch the lowest in 7 years if exports do
not pick up during next few months. However, guar
exports from the country is at 1.28 lakh tonnes (lt), higher
by 7.8 per cent for the first 4 month of 2016-17 (April-July
period), according to Department of Commerce data. Last
year, guar exports were about 1.19 lt during same period.
According to the data release, exports of Guar complex
during Jun and July 2016 are higher by 21 per cent and 10
per cent respectively mainly due to recovery of crude oil
prices.
In 2016-17, over 70 per cent of India’s guar products
exported, mainly to the US, China, Norway, Germany,
Russia and UK. The US (35.9%) is the single largest
importer of guar products from India followed by China
(11.54%) and Norway (9.86%). US imported 39,757 tonnes
of guar product in first 4 months of 2016-17 marketing
year followed by China and Norway which imported
12,780 tonnes and 10, 919 tonnes respectively. During the
last year, Lithuania was the fourth highest importer of
guar products from India but this year it has imported only
172 tonnes compared to over 18,000 tonnes in 2015-16.
7.1
4.1
6.0 6.9
3.7
1.3
0.00
2.00
4.00
6.00
8.00
2011-12 2012-13 2013-14 2014-15 2015-16 2016-17*
Yearly Guar complex exports (Lakh tonnes)
Source: Dept of Commerce, GOI * April-July 2016
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Agri-Commodity Update – Guar
Friday, October 07, 2016
Technical Levels (Nov 2016)
Commodity Support 2 Support 1 CMP Resistance 1 Resistance 2
Guar Seed Oct’16 3250 3350 3490 3650 3800
Guar Seed Nov’16 3180 3300 3539 3700 3850
Guar Gum Oct’16 6000 6200 6490 6750 6900
Guar Gum Nov’16 6200 6400 6660 6900 7100
Price Outlook
Guar complex prices were at the lowest levels in five years
during the first half of 2016 and now have recovered more
than 20 per cent from the lower levels as there was report
of lower area and improvement in crude oil prices. The
increase in guar product exports in the new market year
support prices of guar seed. However, good monsoon
season, favorable sowing climate, higher carryover stocks
and good supplies from the stockists in the domestic market
kept pressurizing the prices whenever the prices have
recovered during the sowing season.
Overall, guar fundamentals looking in balance due to
nearing harvesting season, reports of sufficient stocks from
last year and lower than expected export demands. We
expect guar seed and guar gum prices to trade lower if
export demands will not pick up in the coming months. As
per the export data available for the last three years, the
export volume for the guar complex is highest during the
months of November and December.
The factors, which may affect the guar prices over next few
month may be the price of crude oil and export demand
from the US and China. During the current year, the
supplies are adequate for guar seed and gum compared to
the demand for guar products.
The prices of guar complex may improve if the exports pick
up and production estimates from Rajasthan decline
drastically. Many traders and analyst, expect this scenario
due to lesser area under guar in top three producing states
during the current season. Further, the prices of guar
products depends mainly on crop condition in Rajasthan and
export demand from the US coupled with demand from
other industries like pharmaceutical, food and explosives
industry.
Technical Outlook
In the weekly price chart of NCDEX Guar Seed Oct, the
chart pattern has formed higher top and higher bottom
formation, which is the sign of Up-trend as it is moving
both ways but in a tight range of 3350 and 3850.
As per the moving average prices are trading below its 50,
100 week EMA but trading above its 20 weeks EMA
(exponential moving average), which suggest the upside
trend in short term. Technical indication 14 week RSI is
trending down but MACD is showing a positive
divergence, which is a sign of consolidation.
Thus, the chart formation is positive and technical
indicators suggesting a consolidation phase and we
recommend, “Buy on dips for NCDEX Guar Seed”.