MUMBAI (Commoditiescontrol) –Guarseed and Guargum prices continued to exhibit bearish tone in both spot as well this week (Mar 19-23) as on futures market in the absence of encouraging signs of recovery in demand.
Guarseed and Guargum prices in the spot market (Jodhpur) went down by 0.25% and 0.17% at Rs 4191/100kg and Rs 8,895/100kg respectively during the week.
Other the fall was little severe on futures as the most-active April Guarseed and Guargum dropped 2.81% and 3.12% at Rs 4157.5/100kg and Rs 8,835 respectively.
Financial Year-End-IMD Monsoon Forecast Next Month Weigh Prices There are various negative factors that has weighed on prices of Guarseed and Guargum during the week. Demand was lackluster in Guarseed due to falling prices, but also due to ahead of financial year-end 2017-18 (Apr-Mar).
Further buyers have also opted to wait and watch rather than doing bulk buying due to expectations that India Meteorological Department (IMD) may come out with monsoon forecast (Jun-Sept) any time later next month (April).
Initial predictions released by the Indian meteorological department (IMD) have shown favourable monsoon conditions from the Pacific and Indian Ocean, which increases the probability of a normal monsoon this year.
These indications for a favourable monsoon were made in IMD's recent El Niño southern oscillation and Indian Ocean dipole (IOD) bulletin for March.
As per the bulletin, currently, La Niña conditions are existing over equatorial Pacific Ocean. The latest monsoon mission climate forecasting system forecast has indicated that, La Niña conditions are likely to persist for the entire forecast period.
Poor Demand Overshadowed Positive Crude Oil/U.S Rig Count Crude oil prices posted their biggest weekly gain in eight months with rising geopolitical risk in the Middle East threatening security supply once again.
Guargum is widely used in extraction of oil and natural gas with U.S is the largest consumer of Indian Guargum and thus is become necessary to tracking crude oil prices. Rising crude oil prices will promote higher investment in sector and may result in better demand for Guargum.
This week saw four net rigs added to the oil patch while one rig was tacked onto natural gas fields, according to weekly data collected by Baker Hughes, a GE company. The overall U.S. rig count is now up to 995 rigs, including 804 of them drilling for oil.
Arrivals Declines This Week Guarseed daily average arrivals during the week stood lower at 15,666 bags (100kg each) against 17,000 bags on previous session. Guarseed arrivals so far this season, started from Oct 2017 totaled at 42.30 lakh bags.
Ample Stock To Cater Future Demand
The slow pace of export against market expectations has led to accumulation of huge stocks in the country, which is more than sufficient to cater demand for the rest of the season.
The availability of Guarseed for the marketing year (MY) 2017-18 (Oct-Sept) pegged at 1.50 crore bags (including estimated 1 crore bags of opening stock). After removing the arrivals of this season i.e. 42.30 lakh bags, the estimated remaining stocks in the country will be around 1.07 core bags.
The current pace of Guargum export is not going the make any major difference up to this season-end. Guarseed stock will deplete at faster pace only in case monthly Guargum export rises to 50,000 metric tonnes, other wise there is very less possibility of any major recovery in Guarseed and Guargum prices.
Guargum export during the MY Oct-Jan rose 7.93% at 94,973 metric tonnes (MT) compared with 87,990.28 MT same period a year ago, according to commerce ministry.
Monsoon Forecast & Export To Set Future Trend
The future trend of Guarseed and Guargum is heavily rely on India met department monsoon forecast and export demand in the coming months. The possibility of good rally in prices will increase in case export demand rise sharply from hereon.Delay or weak monsoon during June-September may also help prices.
Futures Market
Guarseed and Guargum prices on futures counter (see chart below) declined along with volume and open interest indicating that bear are still controlling the market and thus further fall in prices can’t be ruled out.
ConclusionFurther fall in Guarseed and Guargum prices with volatility can’t be ruled out due to poor demand in the spot market. Crushers are the main buyer of Guarseed, but they are also doing need-based buying, while stockists are out of the market amid bearish outlook ahead.
(By Commoditiescontrol Bureau; +91-22-40015533)
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