Spot Guarseed/Guargum Down For Second Week, May Find Support At Lower Level

MUMBAI (Commoditiescontrol) – Spot Guarseed and Guargum prices remained under pressure for the second straight week (Mar 12-16) due to subdued activity in the spot markets ahead of financial year-end, higher supply and bearish futures. Also, poor inquiry in front of export was also one major factor affecting prices.

Guarseed prices this week fell 1.16% at Rs 4,202/100kg at the benchmark Jodhpur market, while Guargum dropped 0.77% at Rs 8,911. Spot Guarseed prices during the week ranged between Rs 4,202-4,300, while Guargum hovered between Rs 8,911 to Rs 9,220.

Business activity in the spot market was mostly dull so far this month due to falling prices against rising supply from farmers-end as they are selling their produce in panic to avoid any further losses and also make room to hold other crops, like mustard and chana, which is expected to provide good return compared with Guar.

The daily average arrival of Guarseed during the week increased to 17,000 bags (100kg each) as against 14,833 bags a week ago.

Guarseed arrivals so far (March 17) this season (2017-18), started from October 1, 2017 stood at 41.35 lakh bags, which is 82% of estimated production of 50 lakh bags. Now just 18% stock from 2017-18 crop left for the consumption, however it may not provide any major boost to prices due to huge around 1 crore bags of carry-over stock.

The total availability of Guarseed for the season was estimated around 1.5 crore bags and in case export of Guargum performed as per market expectations then the ending stock is expected to drop to multi-year low.

A Guargum exporter based in Jodhpur said “Guargum end stock may drop to 2-3 lakh tonnes this season 2017-18 from estimated 10 lakh tonnes a year ago. It is very difficult to predict stocks as farmers or stockists tend to hold crop for 2-3 years with expectations of better return and these stocks later on exchanged outside of AMPC and make the job difficult to project stocks.”

These numbers could vary between +10% as I already said it is very difficult, and all these figure in the industry is basically based on assumptions, he noted.

Although export in recent month was not very encouraging, but still satisfactory under present uncertain global production. Guargum export during the year Oct-Sept (2017-18) is however expected to perform better than last year mainly due to rising U.S rig count.

Guargum export (including Guargum powder, Guar Split and Guar Meal) during April-January increased 29.39% at 4.05 lakh tonnes compared with 3.13 lakh tonnes a year ago. However export data during the last couple of month was not in line with market expectations, which has been also reflected in the prices, which slump during the same period.

At present supply-demand situation in Guarseed is pretty balanced and it will constraint in case Guargum demand boost in the international market.

Business Activity Dull Ahead Of Financial Year-End
Demand in the spot market was dull during the month as big traders are mostly busy in account related work and they avoid any bulk buying until they have large commitments. Business activity is expected to remain dull for the next couple of week.

Futures Analysis
Contrary to the spot market, Guarseed and Guargum April futures settled this week 1.03% and 0.49% higher at Rs 4,278/100kg and Rs 9,120 respectively due to some buying good buying witnessed on Friday at the lower level, helping commodity to pare losses to settle in positive trajectory.

Guarseed futures closed higher this week with volume, while open interest has shown inclination indicating that short position are getting covered as prices have already corrected sharply in recent weeks and these lower level may support some buying. Similar movement was also observed in Guargum.

Oil Rig Added This Week In U.S.
U.S. energy companies added oil rigs for the seventh time in the last eight weeks on expectations crude prices in 2018 will top 2017, prompting more drillers to boost spending plans for this year.

Drillers added four oil rigs in the week to March 16, bringing the total count to 800, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

The U.S. rig count, an early indicator of future output, is much higher than a year ago when 631 rigs were active as energy companies have continued to boost spending since mid-2016 when crude prices began recovering from a two-year crash.

Crude Oil Settle Higher On Sharp U-Turn
Oil settled higher Friday, following an intraday U-turn that prompted a swing to a weekly gain.

Expectations for growth in global crude demand outweighed pressure from concerns over strong U.S. production and a weekly rise in the number of active domestic oil rigs.

April West Texas Intermediate crude +1.73% on the New York Mercantile Exchange rose $1.15, or 1.9%, to settle at $62.34 a barrel after making only modest moves in either direction in early trading. It saw its highest finish since March 6 and climbed roughly 0.5% for the week, according to FactSet data.

Fundamental View
Guarseed and Guargum prices after recent correction have turned attractive and now some recovery in prices can't be ruled out in case prices hold support level of Rs 4,200 and Rs 8,800 in the spot market. But upside likely to be limited due to expectations of slow activity in the spot markets amid financial year-end.

Spot Technical Idea: Guargum Jodhpur | Guarseed Bikaner

(By Commoditiescontrol Bureau; +91-22-40015533)