Weekly: Guarseed/Guargum Down For Second Straight Week; Volatility Expected Ahead

MUMBAI (Commoditiescontrol) – Spot Guarseed and Guargum prices fell for the second straight week (Feb 12-16), however managed to pare some losses on late buying witnessed on Friday supported by revival in demand at the lower level accompanied with strong crude oil.



Guarseed and Guargum prices declined 1.42% and 3.34% respectively at the benchmark Jodhpur market of Rajasthan.

Guarseed and Guargum started the week on Monday with positive note, but soon loses momentum as lackluster inquiry and weak crude oil dented market sentiments, however some late recovery observed on Friday, but couldn’t able to jump up enough to settle this week in positive territory.

Buyers in the spot market during the first couple of days of current week were mostly calm due to nervousness amid sharp losses of more than 4% occurred last week.

The sharp fall in prices earlier last week was unexpected by market players as they were with view that bull run will continue to ride on optimism about rising export of Guargum, but the December month export data has come out with shock and disappointed the market.

The monthly Guargum export between April-November in percentage term averaged at nearly 47% higher, but December month export rose only by 10% at 43,881 metric tonnes compared with 39,675 metric tonnes a month ago.

The data came as a surprise for industry players as they were expecting it to rise by at least 20% and thus selling pressure witnessed at the higher level.

The selling pressure was mainly on futures, but not observed in the spot market as supply remained mostly flat throughout the week. The daily average arrival during the current week stood around 14,000 bags (100kg each) and no major volatility seen. However, sellers were forced to reduce their quotes tracking futures.

This shows either there is lesser stock with farmers or they are holding their produce tightly with a view to sell it later at higher rates.

Arrivals are going to be around present level and unlikely to increase as farmers in the spot market are eyeing target of Rs 5,000 and above level in the spot market.

Futures Market
Guarseed March contract settle down this week by 1.1% at Rs 4,497/100kg on the National Commodity & Derivatives Exchange Ltd (NCDEX) after trading in the range of Rs 4,332 to 4,524.5. Volume and open interest clocked at 130,060 lots and 158110 lots respectively. Volume and open interest has declined gradually during the week along with price and indicating build up of short position.



Similarly, NCDEX Guargum March futures ended the week 2.80% lower at Rs 9,667/100kg. The contract during the week hovered between Rs 9,393 to 10,016. Volume and open interest in the contract recorded at 28,115 lots and 69,450 lots respectively. Daily volume and OI during the week were on the lower side and thus it can be observed that selling pressure can’t be ruled out.

Crude Oil & Oil Rig Count Report
Oil futures maintained gains Friday after data showed a rise in the number of U.S. oil rigs this week. Baker Hughes said the number of U.S. oil rigs rose to 798 versus a total of 791 a week ago.

Oil prices edged up on Friday as a rebound in the global equities market and a weak dollar supported crude’s recovery from last week’s slide.

Brent crude futures LCOc1 settled 51 cents, or 0.8 percent, higher at $64.84 per barrel, after touching eight-day highs. The global benchmark ended the week up more than 3 percent, partially recovering from a decline of more than 8 percent last week.

U.S. West Texas Intermediate crude CLc1 rose 34 cents, or 0.6 percent, to $61.68. WTI gained 4 percent this week after losing nearly 10 percent last week.

Money managers slashed their bullish wagers on ICE Brent crude oil futures by the most in nearly eight months in the week to Feb. 13, data showed, as prices plunged amid concerns of oversupply.

Speculators also cut net long U.S. crude futures and options positions in the week to Feb. 13 by the most since late August, the U.S. Commodity Futures Trading Commission (CFTC) said.

Conclusion:
Market will eye on crude oil prices and export of Guargum as both are key ingredient to set future course of price trend. The present fundamentals in Guarseed and Guargum is not very optimistic after poor December Guargum export data. Crude oil is also very volatile. Upside potential is limited at present, but in case crude oil prices revive sharply then there is hope of good recovery in Guarseed and Guargum prices.

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