SHEFEXIL’s Final Report on the Guar Crop for 2016-17

SHEFEXIL, the nodal Indian Government Agency for Guar Gum export, has come out with the Final Round Report for the Guar Crop for the 2016-17 season. The crop survey was undertaken by the Nielsen Company, Mumbai, at the behest of SHEFEXIL, Kolkata. The estimated Guar Seed crop for the 2016-17 is 17.5 million bags of Guar Seed – approximately 36% lower than previous years.

To view the complete report please click HERE

SHEFEXIL’s 3rd Round Report on Guar Seeds Production for 2016-17

SHEFEXIL, the the nodal Indian Government Agency for Guar Gum export, has come out with the 3rd Round Report for the Guar Seed crop for the 2016-17 season. The crop survey was undertaken by the Nielsen Company, Mumbai, at the behest of SHEFEXIL, Kolkata.

To view the complete report please click HERE

Shale Spending Is Set To Soar

Oil prices are rising and the worst of the downturn appears to be over. After two years of spending cuts, 2017 could mark the first time in several years that spending levels across the oil and gas industry increase.

North American oil and gas companies could ratchet up spending by as much as 30 percent, according to Raymond James. That will be possible because banks are finally showing signs of loosening credit once again, after two years of slashing lending.

Click here to read the complete OILPRICE.COM article

Monsoon progressing well, Guar prices stable for now

The Indian Southwest Monsoon has been progressing well this year.

Due to the significant decline in prices for Guar seeds/splits, and also due to the significant decline in Guar Gum export from India, the total area that has been brought under Guar cultivation this year has also declined significantly and which be seen below:

Rajasthan  – Area covered in Hectares (as on 18-Aug-16)
5 year avg. area for year ending 2014 Area sown by 20-Aug-15 Area sown till date % as compared to same period of 2015 % as compared to the 5 year avg. area
4,060,000 3,918,100 2,838,500 72.45% 69.91%
Gujarat – Area covered in Hectares (as on 22-Aug-16)
3 year avg. area Area sown by 20-Aug-15 Area sown till date % as compared to 2015 % as compared to the 3 year avg. area
378,800 263,800 119,500 45.30% 31.55%

Haryana is also an important state for Guar cultivation but the latest figures are not available from the state government. However based on market sources, the area brought under Guar cultivation in Haryana this year is 50% as that compared to last year.

However even after this significant decline in Guar cultivation, the total Guar seed output expected this year, plus the carry-over from the 2015 crop, should be more than sufficient to meet demand. All this info is already known to all the market players and we believe the same has already been factored into the current prices.

Moving forward, unless there is a sharp drop in crude oil price and/or a sharp drop in Guar Gum exports, we do not expect Guar prices to decline significantly in the near term.

However:

  • If the crude oil price increases significantly from the current levels or
  • If Rajasthan, which is by far the most important Guar growing state, does not get a second round of rains in about 3 weeks

then it is likely that Guar prices will also start moving upwards

Psyllium Husk prices at an all-time high!

In our Psyllium Seed – 2016 Crop Report which was published on 12-Apr-16, we had estimated that the crop this year would be about 25% – 30% less as compared to last year. Based on the arrivals in the last 3.5 months, the above figures seem fairly accurate. Up until now, a total of 1.25 million bags of Psyllium Seed have arrived into the market and we expect another 350,000 – 400,000 bags to arrive in the near future.

Overall demand for 12 months starting from Apr-16 is still estimated to be the equivalent of 1.9 – 2.0 million bags of Psyllium Seed and this is going to be significantly greater than upcoming supply.

The current prices for various grades of Psyllium Husk are at an all-time high. Procter & Gamble, the single largest buyer of the product, is procuring material at regular intervals and this is providing very good support to the current prices.

Unless there is a significant decline in demand for Psyllium Husk this year, it is likely that we might have a shortage by the end of this year and/or beginning of 2017. And as long as there is ongoing regular demand for Psyllium Husk over the next few months, it is unlikely that there will be substantial drop in prices.

Good monsoon forecast should keep Guar prices stable

In our last Guar Market Update on 18-Feb-16 (as given in the blog entry below) we had made a point that all the bad news seems to be priced in and that Guar splits prices should remain confined in a narrow band between $800/MT to $950/MT. In fact Guar prices remained even more stable and were confined to a tight band between $800/MT to $850/MT.

See chart below for more details

In the last few days, Guar splits had started inching upwards in sync with the rise in crude oil prices.

However the first initial forecast for the Indian Southwest Monsoon 2016 from Skymet Weather (a private organisation), which came out yesterday, and which stated that “Monsoon 2016 is likely to remain above than the normal at 105% (with an error margin of +/-4%) of the long period average (LPA) of 887 mm for the four-month period from June to September”, has resulted in Guar splits prices giving up its gains from the last couple of days. To view the complete Skymet Weather’s Monsoon Foreshadow report please click here.

Additionally the 1st Stage LRF (long range forecast) of the Indian Southwest Monsoon, from the Indian Meteorological Department, has also just been released in the last half an hour and it states “Quantitatively, the monsoon seasonal rainfall is likely to be 106% of the Long Period Average (LPA) with a model error of ± 5%. The LPA of the seasonal rainfall over the country as a whole for the period 1951-2000 is 89 cm”. To view the complete forecast please click here.

Both these positive forecasts should ensure that Guar splits prices remain stable over the near term. However it will be very important to keep a close watch on the onset and progress of the monsoon over the next 2 to 3 months …. we will keep you posted!

Psyllium Seed – 2016 Crop Report

Based on information collected in the field, we believe that this year’s Psyllium crop is going to be 25-30% less than that of last year. State-wise crop figures are given below.

Rajasthan is THE leading producer of Psyllium seed in India and the Psyllium seed produced in Rajasthan is considered to be of very good quality. This year the crop in Rajasthan is expected to be around 25% less than that of last year – only 1.2 million bags. Madhya Pradesh ranks second in the production of Psyllium seed and the crop from Madhya Pradesh is expected to be 50% of that of last year – only 200,000 bags. The state of Gujarat ranks a far third in the overall production of Psyllium seed in India and the crop from Gujarat this year is expected to be the same as last year – 100,000 bags.

Given in the table below is a snapshot of the crop arrivals from the last few years and the estimated arrivals for 2016.

State 2011 2012 2013 2014 2015 2016*
Rajasthan 730,000 740,000 750,000 825,000 1,600,000 1,200,000
Madhya Pradesh 400,000 610,000 590,000 400,000 400,000 200,000
Gujarat 50,000 40,000 60,000 70,000 100,000 100,000
Total 1,180,000 1,390,000 1,400,000 1,295,000 2,100,000 1,500,000

The carry-forward stock also plays an important role in the market. Unfortunately, there is not much carry-forward stock this year and we expect the number to be around 100,000 bags as compared to the usual around 300,000 bags.

The demand for Psyllium Husk, and allied products, has been increasing over the last few years. Overall demand for Psyllium Husk products for the coming 12 months is expected to be the equivalent of 2,000,000 bags of Psyllium seed as against the estimated available supply of 1,600,000 bags (2016 crop + carry-forward stock).

As is apparent from the above figures, apparent/expected demand is significantly greater than upcoming supply. And so although there has not been any significant pick-up in overseas demand yet, Psyllium Husk producers, stockists, etc., have been active buyers in the market and as a result Psyllium seed prices have moved up by around $225/MT in the first 10 days of this month.

Guar Gum – all the bad news seems to be priced in!

The world is in turmoil and the Guar industry is no exception. Please see the chart below which depicts Guar splits prices (in USD/MT) from Jan-15 to Feb-16.

 

GDHS Price Chart Jan-15 to Feb-16

During the period shown above

  • North American Rig Count has dropped from 1811 to 763 – down nearly 58%
  • Brent Crude has dropped from $56.42 to $34.73 – down nearly 39%
  • Guar splits prices have dropped in Indian Rupee terms by 54% but in USD terms by 58%

From Oct-15 up until now, nearly 70% of the Guar seed from the new crop has already come into the markets and hence there is not that much pressure from the supply side. On the demand side Guar Gum exports, after having fallen significantly over the last 2 years, have plateaued and don’t seem to be falling off a cliff anymore! In the US a lot of Fast Hydrating Guar Gum had been piled up in the second half of 2015 and it seems that most of this has now been used up.

So to summarise – things probably cannot get any worse (?!) as far as crude prices are concerned and with demand from food, and other non-oil industries, remaining stable, Guar splits prices should also remain confined in a narrow band between $800/MT to $950/MT. At present the Guar splits price is around $850/MT and hence any immediate requirements for the next 2 to 3 months should be covered at this time.

Further purchase decisions can then be made based on the Indian Meteorological Departments’s first Long Range Forecast for the 2016 Southwest Monsoon and which should be available by Apr-16.

Guar Splits and Crude Oil – both at near 7 year lows!

With crude oil prices falling to near 7 year low, and U.S. Rig Count down by 37% from the same time (12-Dec-14) last year, prospects for the Guar Gum industry are not looking good. Following the decline in crude oil prices, the resultant evaporation of Guar demand from the hydraulic fracturing industry and the more than enough Guar seed available (from the new crop of Nov-2015) to meet any demand, Guar splits price today is at a 5 year low, in Indian Rupee terms, and at a nearly 6.5 year low in USD terms!

Just like it is very difficult to predict crude oil pricing, and if this is the “bottom”, the same applies at present to Guar splits pricing. However considering that the Guar splits price is already at a multi-year low, it would be a good idea to cover your Guar Gum requirements for atleast the next one or two months if not more. Do let us know if you would like to receive a quote!

Guar Crop 2015 Report

Hello everyone

We are writing to bring to you the First Round Report, or the “Dipstick Round”, of Guar seed estimation, commissioned by the nodal Indian Government Agency for Guar Gum export, SHEFEXIL, and carried out by The Nielsen Company.

The sample size for this report was 393 farmers (details given below)

Rajasthan 170
Haryana 60
Gujarat 60
Madhya Pradesh 40
Uttar Pradesh 38
Punjab 25

The first 3 states namely Rajasthan, Haryana and Gujarat (in that order) are the most important states for Guar cultivation. The perception of the farmers from these 3 states, about the 2015 crop, is that the crop is “Bad compared to last year”. This is specified on the last page of the report. Please click here to view the complete report.

However considering the initial estimates of the crop from this year, the carryover from last year and also the low demand from the shale oil industry in the US, it is quite clear that supply exceeds current demand significantly. See table below for further details.

Bags (100 kg each) Metric Ton
Guar Seed Crop 2015 15000000 1500000
Converting to Guar Splits 420000 A
Guar Seed carryover from 2014 5000000 500000
Converting to Guar Splits 140000 B
Guar Splits carryover from 2014 20000 C
Total Guar Splits available in MT 580000 A+B+C
Total Guar Splits available in MM LBS 1279

The yield from splits to powder is dependent on the type of Guar Gum being produced. However considering an average yield of 93%, Guar Gum powder available (93% of (A+B+C)) = 539,400 MT = 1189 MM lbs

Most of the seed that has started arriving into the markets is getting “dematted” and going into the warehouses of NCDEX – the commodity exchange. As regards to pricing, despite the good arrivals from the new crop, Guar seed/splits prices are not declining much further. Hence we believe that although it is unlikely that prices are going to run up anytime soon, we might be now close to the bottom.