GUAR COMPLEX OUTLOOK Report as on 10th Sept 2020

GUAR COMPLEX OUTLOOK ____ Report as on 10th Sept 2020_

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Strengths ❏ Guarseed prices gained 13.72% in the last 3 months led the way showing a strong

recovery in prices. ❏ Guar seed gained to hold above the 4000 level mark, prices pick up after strong export

demand with strong support at these levels. ❏ Guar prices to rise on concerns over monsoon, lower carryover stocks ❏ Export demand for guar gum from the food sector has revived in the past two months,

with sales increasing by 15% over the previous year ❏ There is demand in Europe, USA and China, where it is used by the food industry as a

gelling and thickening agent in ice cream, chocolate, pasta and jams among others ❏ Fall in the prices of guar has caused disappointment among the guar-producing farmers

complaining to shift towards other options. ❏ In January Rajasthan Chief Minister Ashok Gehlot urged the Centre to remove

bottlenecks in the export of guar gum. ❏ Oil drilling activity has just resumed in the US aftermath of Hurricane Laura. ❏ The stock in the hands of farmers and traders is expected to be around 5-6 lakh tons,

lower compared to 9-10 lakh tons of the previous year.

Weaknesses ❏ Since last year already Guar prices were hurt by weak demand from global markets, the

ongoing COVID-19 pandemic has made the situation for the guar industry all the stickier. ❏ Demand from the oil rig companies which use guar gum to extract oil has dropped. ❏ Overseas markets have shrunk primarily because of a slump in demand from the largest

buyer, the US, and the decline in the application in shale oil fracking due to lower crude prices.

❏ Xanthan gum is a common additive found in everything from cosmetics to ice cream, that acts as a thickening agent, binder, and emulsifier.

❏ Trade tensions between the US and China intensified, putting pressure on crude oil prices and bringing down oil drilling activities in the US.

❏ The easterly winds regime will dominate the Indo-Gangetic plains, going up to Rajasthan. This is likely to delay the process of withdrawal of monsoon. The commencement of monsoon withdrawal may thus get delayed by almost 15 days or so from Rajasthan.



Opportunities ❏ Guar seed production over the year has dropped considerably as farmers have cut guar

area in Rajasthan due to higher pulses and oilseed planting as they get good profits on them due to higher prices.

❏ A depreciating rupee is set to improve India’s competitiveness in the world market and thus help boost exports of agricultural products such as Guar gum.

❏ Sentiments are gradually turning positive as mandis reopen and exports start rising. ❏ Falling stocks are also likely to support prices in the medium-term, also lower prices are

lucrative for exports which will support prices. ❏ Excessively high rains in the growing states are helping market sentiments to hold prices

above the 4000 level mark. ❏ The tension between US & China continues, there are expectations that export demand

for Guar gum will gradually rise—displacing cheaper Chinese substitutes. ❏ Major buyers are US companies for guargum like Schlumberger, Halliburton and Baker

Hughes. Demand has also started from China National Petroleum Corporation and Russian firms Gazprom Neft and Tatneft as covid concern dropped in China as of now.

❏ Prices are above the 4000 level with positive sentiments as stocks of guar seed are diminishing with the farmers and stockists due to continuous drop in guar seed production in the last five years coupled with steady increase in guar gum exports.

Threats ❏ India’s farm exports for the financial year 2019-20 fell 13 per cent in value terms at $16.08

billion as against $18.58 billion in the previous year. ❏ Prices fell a lot earlier this year due to lack of exports on account of coronavirus over the

last 3-4 months and now concerns of 2nd waves in front of us. ❏ Social distancing norms and aversion to travel meant a collapse in demand for crude oil

which had a cascading effect on demand for guar gum, as oil production slumped. ❏ Crude oil prices remain below levels at which many companies can drill profitably and

bankruptcies in the sector are mounting. ❏ Drilling on federal lands is a crucial part of US President Donald Trump's "energy

dominance" agenda to maximize domestic production of fossil fuels. His opponent in the November election, Joe Biden, has pledged to ban new oil and gas leasing on public lands.



Knowledge Bank

What is Guar? Guar or cluster bean (sometimes clusterbean) (Cyamopsis tetragonoloba (syn. C. psoralioides), Fabaceae) is an annual legume plant that grows in semiarid regions. Guar is drought-tolerant and can be eaten green like snap beans, fed to cattle or used as a green manure. It bears many bean-like pods, each of which contains six to nine small, rounded seeds. The guar seed is typically made up of 40% to 46% germ, 38% to 45% endosperm, and 14% to 16% husk. The gum is obtained from the grounded endosperm.

What is Guar Gum? Guar gum, a natural gum, is an edible thickening agent extracted from the guar bean. Guar beans have a large endosperm which contains galactomannan gum which forms a gel in water. This is commonly known as guar gum and is widely used Food and industrial applications. Guar gum has also proven a useful substitute for locust bean gum.

How is Guar Gum prepared? Guar gum is prepared by removing the husk and germ portions before extracting the gum from the endosperm.

What is Guar Gum mainly used as? Guar Gum is mainly used as a natural thickener, emulsifier, stabilizer, bonding agent, hydrocolloid, gelling agent, soil stabilizer, natural fiber, flocculants and fracturing agent.

What are the properties of Guar gum? Guar gum is soluble in hot and cold water but insoluble in most organic solvents and has strong hydrogen bonding properties. It has excellent thickening, Emulsion, Stabilizing and film forming properties. It is compatible with a variety of inorganic and organic substances including certain dyes and various constituents of food.

How Guar gum powder is prepared? The seeds of Guar are split and the endosperm & germ is separated from the endosperm by sieving. Through the heating, grinding & polishing process the husk is separated from the endosperm halves and the refined Guar Gum split are obtained. Through the grinding process the refined Guar splits are then treated and converted into powder.

More About Guar Gum Plants : Guargum is a product which is made from Guar seeds. Guargum is being used in different industries in India and abroad, but now it is in Heavy demand due to its utility in the Crude Oil Industry. India is enjoying the top position in production and export of this product in the world market, 80 % of global demand is met by India. Guar is basically Simple, Short & Easy rain fed (No irrigation) crop and cultivated in Rajasthan & Haryana state.



BALANCE SHEET India’s Balance Sheet

Source: Agriwatch Figures in Lakh Metric Tonnes

India’s Export

Source: DGCIS Annual Export Value in Rs. Lacs Quantity in MT



Crop-Wise First Advance Estimates



Sr. No. Location Current Sowing

Last Year’s Sowing

Increase/ Decrease in terms of %

1. Rajasthan 23,84,700 ha 27,52,100 ha -13.35%

2. Gujarat 1,20,718 ha 1,42,202 ha -15.00%

Weather Report According to the Indian Meteorological Department, the cumulative rainfall for the Southwest Monsoon 2020 is two percent higher than the normal fifty-year average of 710 millimeters, as of August 31, 2020. Planting area for the kharif crop is seven percent higher than last year, with significant area increases for rice, pulses, and oilseeds

Monsoon Recovers in August During August, the southwest monsoon was very active in Central and Southern India which led to cumulative rainfall that was 27 percent above normal rain levels. The intense monsoon rains in August raised the cumulative rainfall during the monsoon season to two percent above normal rain levels. More than 80 percent of the districts across India have received normal to excess rains. Additional rains in September will likely affect crops at various stages of growth, and excess flooding may lead to waterlogged fields, thereby impacting overall yields.

Progress and Forecast of the Monsoon 2020 The Low Pressure Area lies over Southwest Rajasthan & neighbourhood. It is likely to persist for one day and merge with heat low thereafter. The monsoon trough is active and south of its normal position. It is likely to remain active during the next 2-3 days. Under the influence of the above systems, widespread rainfall with isolated heavy to very heavy falls is very likely over Gujarat state and heavy falls over southwest Rajasthan. The other Low Pressure Area lies over North Bay of Bengal & neighbourhood. It is likely to become more marked during the next two days. Under its influence, widespread rainfall with isolated heavy to very heavy falls is very likely over Odisha, Gangetic West Bengal, Jharkhand during next 3-4 days and over Chhattisgarh, Madhya Pradesh & Rajasthan.



Seasonality



Technical Outlook:

Guar Seed :

=========================================================



Chart Reading Guar seed on NCDEX is forming lower highs since March 2019. It is projected to form a cup and handle pattern as seen in the chart. Guar seed prices face an important resistance at 4600 levels. If prices manage to break and stay above this resistance it can even touch 5400 levels in coming months. If it fails to stay above this level its support is at 3800 levels. RSI just crossed above 52 levels giving a bullish signal for prices. Low volatility is expected in the coming days. MACD still shows a slight weakness in prices. On the monthly chart we can see crossover of the signal line and MACD giving a positive signal for prices. Guar seed has low volumes on NCDEX.

OUTLOOK

4-6 Months View Prices are expected to go upto 5400 levels.

Guar Seed prices are expected to rise due to lower sowing this year and depreciating rupee. Opening up of economies will also support price rise.



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Guar Gum



Chart Reading: Guar gum on NCDEX formed a Gartley bearish pattern last month. Prices reversed at 6706 levels and touched low of 5875 levels. Prices reversed and turned bullish and are expected to follow trend lines making higher highs. Prices are expected to face next resistance at 6388 and 6706 levels respectively. Support for prices is at 5875 and 5475 levels respectively. Prices on daily charts are near its 200 DMA levels. Volumes are also seen to be rising rapidly on NCDEX. RSI on a daily chart is near 50 levels and if it breaks above 52 level it will be a bullish indicator. CCI and MACD both suggest positive outlook in coming days.

OUTLOOK

1-2 Month View Prices are expected to go upto 6963 - 7200 levels.

Ratios Guar Gum And Guar Seed Ratio Chart:



Guarseed & Crude oil Ratio Chart:

Guargum & USDINR Ratio Chart:



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GUAR COMPLEX OUTLOOK Report as on 10th Sept 2020

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