Insights from Three Headed Lion

Guar output in the key guar producing state in Rajasthan, India could fall as monsoon once again plays spoilsport. Rajasthan is the leading producer of guar contributing over 70 percent of guar produced in the world. Consequently, if the current trend continues, total guar production in India is likely to fall in 2014.

A delay in the arrival of the crucial monsoon rains pushed sowing from last week of June to third of week of July. The late arrival of monsoon also saw a decline in sowing area than what was originally planned in the region. Additionally, immediately after sowing was concluded the region received very heavy rains (flood like conditions in some areas). The erratic nature of monsoon is beginning to take its toll on the crop as there are reports of crop disease, and crop damage due to excessive rain.

“Owing to unfavorable weather conditions and a decline in the cultivation area we expect to see a fall in guar production this year.” Dr. D Kumar, a leading guar expert and a keen watcher of the guar industry in India.

The markets are beginning to react on the prospect of low guar output as guar spot prices have climbed 18% so far in August on NCDEX, the leading commodity exchange in India (Figure 1). There is also a corresponding jump of 17% in guar gum spot prices (Figure 2). Affects are also being seen in the futures market as October and November 2014 future prices for guar gum are up 21% and 22% respectively compared to the opening spot price for August 2014.

“Weather conditions over the course of next couple of months will be crucial in determining the final output of guar this season. It is critical to monitor ground level trends as the guar season unfolds. As in the past, THL will be closely watching developments in the guar market.” Says Javed Matin, Co-Founder, Three Headed Lion, Inc. (THL) and the chief author of the latest market guar gum report: 2014 Guar Gum Market Report.

Source: Field research of guar producing region by Three Headed Lion, Inc., a Houston, TX based leading research and marketing intelligence firm.

 About Three Headed Lion, Inc.: THL provides comprehensive and reliable market data, intelligence and risk management services for companies doing business in India, by connecting corporate level priorities to critical ground level market realities. THL uses a network of over 1,000 market intelligence and information providers (MIIPs) located in 640+ districts across the country, to source invaluable grass root level market data, intelligence and insight. The company has offices in Bangalore and Houston.