Guar (Cyamopsis tetragonoloba) isa leguminous crop, which grows best in sandy soils and needs moderate,intermittent rainfall. It is a hardy, drought resistant bush and is sown afterthe first monsoon showers between the second half of July and early August. Itis harvested during late October-November. Green pods of Guar are consumed as avegetable.
Guar is grown mainly in India,Pakistan, Sudan and parts of USA. India grows 7 to 9 Lakh MT, or 80% of theworlds annual guar production. Rajasthan is the major Guar producing state,accounting for 70% of the production. Gujarat, Haryana, Punjab, U.P. and M.P.are other producing states.
The use of gum in industry isgoing to only increase in future. In fact, the US Food & DrugAdministration department has approved guar as a replacement to fats in food.Guar is a cheaper substitute to Xanthan gum (pure culture ferment) or locustbean gum. The processed food industry in India is expected to grow at a rate of10% during 2010-2015. New applications and substantial market growth areexpected. The same goes for the pharma as well as the personal care industry.These industries are not just growing domestically but internationally as well.
Factors influencing prices
? Changesin domestic production due to rainfall fluctuation
? Carryover stocks
? Surplusavailable with other exporting countries
? Variationin demand of the importing countries
? CurrencyExchange rate: A relatively strong USD is conducive for exports and vice versa
? Governmentpolicies: taxes/subsidies etc
Due to high dependence onMonsoons, Guar supply varies largely between years while the demand isconsistently growing. Being very hardy, the commodity can be stored for a longperiod based on demand and market prices.
Guar seed Futures
Given that guar seed haveconsiderable price volatility and that the export realizations have alsovacillated between years, Exchange traded guar seed futures are ideal for pricerisk management needs of the processors, exporters and end users. Those with nonatural exposure to guar trade can also benefit by undertaking cash-and-carryarbitrage and calendar spread. Speculators can take directional view on futureprices and accordingly take positions in guar seed futures.
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