Ajitesh Mullick
Agri markets started the week on a bullish note. Chana and Guar led the way with oil complex and spices showing moderate recovery in prices.
Chana and Guar seem to be finding strong support at these lower levels after the recent dips. Rising demand for chana amidst the festive season supported prices. Guar traded firm on pick up in export demand with strong support at these levels.
Oil complex firmed up on firmness in international markets as improved festive season domestic demand kept supporting Indian rates.
Guarseed
As per our earlier predictions, Guarseed is again nearing Rs 4,000 per quintal mark. There was some intermittent dips however last week as the Monson situation improved in the main growing area of Rajasthan last week. However, IMD reports indicate that till August 3, the Monsoon situation in North-West India was a cause for concern. It was down 20 percent versus normal during the period.
Lack of rains may well adversely affect the Guar crop. This supported the market sentiments as markets hit the upper circuit for the commodity.
Guar traded firm on rising export demand. The recent rains in Rajasthan and Gujarat had limited the uptrend last week. A rise in export demand is likely to support prices. As face-offs with China continues globally, there are expectations that export demand for Guargum will gradually rise—displacing cheaper Chinese substitutes. Rains are good for sowing at this time. Traders however feel that prices are at very low levels (having already fallen a lot due to lack of exports from coronavirus over last 3-4 months). Further fall may be unsustainable for Guar.
Sentiments are gradually turning positive as mandis re-open and exports start rising. Lack of exports remained a bearish factor, but that is expected to pick up as mandis gradually open up. Reports of higher production prospects and high stocks too put lid on the upside. But demand in coming days could recover once the panic from coronavirus gets over. These lower levels may not be sustainable—as per sources, as they look lucrative for exports to rise. An expected fall in production for 2019-20 due to crop damage reports, amidst expected rise in export demand in coming days — aided by a firm Dollar versus Rupee and firmness in crude oil prices, are likely to be strong supporting factors for the upside movement in prices in 2020. The cheaper Chinese substitutes remain a concern.
As per APEDA, India has exported around 5,13,212 MT of guar derivatives (Powder, Splits and Meal) in FY 2018-19 compared to 4,94,101 MT in FY 2017- 18. Rising export demand from shale gas industry of North America due to rising crude oil prices have now been noted. This year, as per estimates, Gaur seed production will be lower than previous year at 70-80 lakh bags. As per Advance Estimates of Department of Agriculture Rajasthan, seed production for 2018-19 is estimated at 14.55 lakh tonnes in 2018-19 versus 12.44 lakh tonnes in 2017-18. In Gujarat, seed production for 2018-19 is estimated to fall to 0.73 lakh tonnes in 2018-19 versus 1.40 lakh tonnes for 2017-18.
Market trend for Guar will remain dependent on the Monsoon to a great extent as of now. But it's impact will be limited. Whenever there are rains in Rajasthan, it does create some selling pressure – but markets bounce back strongly after that. This indicates overall fundamentals are strong and prices are finding good support here. Any holding above the Rs 4,120 per quintal mark may lead to our net target Rs 4,500 per quintal.
NCDEX Guarseed August contract chart
The author is VP Retail Research at Religare Broking.
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