Trend Analysis of the Guar Business and Future Insights
Several factors have led to the guar price fluctuations in the global markets. The main factors include;
- Fluctuation in the oil drilling operations in the United States and the rest of the world. This happens because the petroleum industry is the biggest consumer of the guar gum powder.
- Fluctuations in the supply. Production of the guar is dependent on the prevailing weather whereby any adverse production weather causes a reduction in the production volume, supply and price increases.
- Demand from other consumer industries. The demand from other industries where the powder is used which include the food industry, chemical industry, pet foods, textile, pharmaceutical and paper manufacturing industries.
The biggest producers of the guar powder have been the Indian subcontinent. There has been a steady rise in guar exports from India at a rate of 20% increase per annum. Over the last three years, there has been a decline in the value as well as sales of the product. This trend started with the crash in oil demand due to development of alternative energy sources. This negatively affected the demand of the guar, but an upward trend is emerging in the year 2017, after increased activity in oil exploration.
Price Movements of Guar
In the current year, the guar prices in the futures market has raised by close to 37%. There have been very positive price indications after the new USA government indicated and actualized its willingness to make the continent self sufficient in oil production. The usage of the guar gum powder in the fraking process of oil mining has caused the turnaround in the declining trend. There have been price movements around the level of INR 4500 /100kg with the prices trending between this level and the level of INR 3200/kg.
Demand versus Supply of the Guar 2016/2017
There has been an increase in the crude oil prices which is likely to create a positive outlook in oil exploration. This combined with the likely decreased supply may cause a price hike and better revenues for producers and processors.
It is estimated that the supply of the guar gum will be reduced up until the October 2017 harvest. According to reliable data sources, the estimated crop level for the 2016-2017 is approximately 17.5 million bags of the guar seed. This figure is approximately 36% lower compared to the previous season. Reduced rains in the main growing areas such as Rajasthan is a key factor of supply and this situation will likely affect the price levels of the product.
Industry forecasts also show that unless there is a rapid decrease in the crude prices and decline in the guar gum exports, the prices of the guar are expected to be stable in the near term.
2020 Market Expectation
Research from the United States markets show that the guar gum powder imports are set to expand by USD 10billion, by the year 2020. This is mainly attributed to increased oil production and supported more by growth in other industries.