The guar crop is grown from seeds, where one hectare requires at least 30 kilograms of seeds. It is done at a spacing of 50 cm between rows and 25 cm between plants. Sowing is done in ridges approximately 3 cm deep. Fertilizer application is required during the growing period. In production, one hectare can produce 5 tons of seed and 50 tones of bio mass. It is drought and salinity tolerant.
In last trading month, the returns from the guar sales have increased by up to 30% all in a period of one month. The prices of seed were approximately 4000 R/100 kilograms and the trend is still rising. Production in the year 2015 was considerably low and market specialists have determined that the carryover stocks are expected to help in meeting the demand levels.
Guar Gum Price Trend in the Year 2017
Cultivation of the guar gum has made definite changes in the lives of ordinary farmers in India. The northern dessert states have been the biggest beneficiaries, with farmers working round the clock to produce as much as possible. This is the only crop that has been able to lift them out of poverty.
Elsewhere, in the United States of America, the shale energy producers are relying on these farmers for supply of the guar gum powder, which is a vital component of the drilling process.
The appetite for the guar gum powder for the petroleum industry in USA has been very consistent, thus translating to consistent income to farmers and changing their fortunes.
Crude Prices versus Guar Powder Demand
The drastic drop in crude prices in the year 2015 led to decreased demand for guar gum in North America. Experts in the industry estimated a 27% decline in the production acreage in the Kharif season as compared to the same period last year.
There has been speculation of Elnino rains in the year 2017, which may negatively affect the production of the guar crop. This may cause an increase in the prices again.
Guar Gum Profitability Calculations
In the last few months of 2017, the price of crude per barrel has been relatively stable hence creating a good support for a bullish trend of the guar in the medium to long term. There are also reports from the United States that production of shale will be high, supported by the Trump administration.
The price of guar gum is arrived by calculating the commodity cost, interest, moisture loss, and storage expenses to arrive at a cost of 4500 R/100 kilograms.
Basing the current prices on demand, then the prices will be expected to be much higher than 4500/kg.
2016 Vs 2017 Guar Gum Powder Market Expectation
As long as the geo political situation remains stable compared to last year, there is positive expectations of good returns in the long term. This will be largely influenced by crude prices in the global market. Farmers have started foreseeing this situation and counting their potential profits.