Some are predicting that the Guar market has hit the bottom.
The supply of seeds in the market has decreased significantly, as speculators and stockists, who are anticipating the prices to increase, have now purchased a majority of the seeds.
The reduction in supply has been exacerbated because Guar currently is not a profitable crop for the farmers to grow. At these prices, the farmers are either breaking even or operating at a loss, which is unsustainable; especially when there are more profitable alternatives. All farmers will choose to grow what they anticipate will produce a higher margin. Crops such as cotton, cumin and edible pulses are just a few of the profitable alternatives
The longer that Guar isn’t viable for farmers to grow the more of an impact it will have on the industry as a whole. If too many farmers switch to different crops, it would have a detrimental impact on the industry; as there is a direct correlation between a significant price decrease and production output.
Demand from both the food and technical industries have increased, due to the price and quality advantage of Guar Gum. For the majority of the food industry, Guar Gum is viable at $2500.00 PMT, or less.
Demand from the oil, pharmaceutical and explosives industry has remained stagnant. These industries collectively make up almost 71% of the total Guar market, therefore low demand from these industries can have a huge impact on the market overall.
Based on some of the trends we are seeing and the information we have received, we do not anticipate prices to reduce much further.
The impending reduction in supply, due to the crop no longer being viable, is anticipated to increase Guar Gum prices.