Polypro IndoPak Guar Gum Market Report 5-17-2017

Key weather related dates that can influence the guar gum market undertone are June 1 and June 10. The first is the historical onset date of the monsoon over the southern state of Kerala. The second is the arrival in Mumbai, the financial center of India.

Other important monsoon benchmark dates are June 15 (southern edge of Indian guar area), July 1 (Jodhpur), and July 15 (eastern edge of Pakistani growing area). May and June are the time of pre-planting rains. July is pre-planting rain and/or monsoon planting rains. The latest planting date is early-mid August.

The market will continue to watch the forecast and actual demand and/or weather events for direction.

Please balance my comments and opinions with others.

Forecast of the Onset Date of Southwest Monsoon – 2017 over Kerala

Polypro Guar Market Report 10-25-16

IndoPak guar crops are progressing and require dry weather through harvest. The monsoon has withdrawn from the guar growing areas. New seed is arriving from the northern growing areas of India and expected to build momentum in Nov/ Dec. Stockists, traders, and manufacturers are purchasing new seed. Price is stable.

It does not appear we will see substantial price moves for the foreseeable future all other things being equal. Guar is one of the cheapest agro commodities and thanks to the past US O&G frac boom it is still viewed as a sure payoff any day now. New crop and carryover stocks are abundant but in relatively strong hands (farmer, stockist and manufacturer) and as a whole are under little financial pressure to liquidate on a large scale. All of which is favorable to the supply side to increase price. Unfortunately for the supply side, world demand is stagnate and US O&G is far less reckless in their purchasing decisions. In addition, the downturn in the US O&G industry has resulted in fewer wells using water gels (guar based) and more “slick water” (ionic polyacrylamide based) frac systems.

Recent crop estimates are in the range of 8-10 lac bags seed (0.8-1.0 million metric ton seed) ex India. One million metric ton of seed translates to a conservative 250,000 metric ton of split/power. Worldwide export statistics ex India for powder/split total 257,000 metric ton. Internal consumption for India is estimated at 20,000 mts annually. In other words,  the new crop is expected to meet 72-90 percent for the forecasted demand expecting that US O&G remains anemic. Carry over stock is estimated at an additional 250,000 metric ton of split/power. An additional 250,000 metric ton of split/power from carry over would increase supply to 162 percent of the forecasted demand. (Note: some are estimating carry over as high as 375,000-500,000 metric ton of split/power but I am not a believer). Pakistan supply and demand zero each other out and was excluded for ease of supply/demand explanation.

However, given what we know today and looking to the crystal ball a down side of $0.10/lb and upside of $0.15/lb for sustained periods are likely the extremes and will require a combination of events. The combination of a larger than expected new crop, decreased demand especially US O&G, positive weather report for next season, summer doldrums, better returns in other agro products, increase inventory at the consumer level and the like can contribute to downward pressure. Conversely, the combination of a smaller crop, increase in US O&G, negative weather / farmer outlook for next season, substantial decline in carry over estimate, declining inventory at the consumer level and the like can contribute to upward pressure.

Polypro IndoPak Guar Market Report 9-19-16

In follow up to our last report, the crop areas planted in August (mainly western Rajasthan and adjoining areas in Pakistan) needs rain in the next 1-2 weeks (sooner the better). The forecast for dry weather has stimulated a bullish sentiment. Stockists and speculators are controlling the market and planning their moves base on weather developments. The extent of the second round of rainfall and international market response will probably be the major factors influencing the next price trend.  US frac demand remains subdued.

IndoPak Guar Market Report 9-6-16

Reports note that the standing guar crop is progressing well. As with all years and excluding the irrigated areas the bulk of the guar crop is planted in stages depending on the initial rainfall. Ideally, the crop as a whole now needs cycles of 1-2 weeks of relatively drier weather followed by periods of widespread rain to promote a healthy yield. Speculators and stockists are reported to be active.

Polypro IndoPak Guar Market Report 8-8-16

As per previous guar market reports, planting is progressing in the main areas. Some areas like western Rajasthan (India) and Sindh (Pakistan) are just receiving the planting rains and sowing  is expected on commence shortly. Early reports suggest normal planting in Pakistan but an estimated 40-60% reduction in some areas of India when compared to last year.  Naturally, the new guar crop needs favorable weather through harvest to see matching yields.

On the surface the reduction appears alarming, but 1)the largest area (Rajasthan) is expected to be normal planting and 2) if yield from the last crop was anywhere close to 2.38 million metric tons of seed as per the attached Nielsen report then a 50% reduction will still result in a “normal” size crop based on long term averages.  Guar crop estimates are always a little sketchy, but taking the report at face value the 2.38 million metric tons of guar seed is the largest guar crop in history and capable of producing  almost 600,000 metric ton of split / powder. i.e., two year supply at the current demand level which includes anemic demand from USA Frac. However, it has been my experience that guar seed has a way of disappearing over time.  The methodology to estimate planted acreage and yield is weak. The methodology to count bags of guar seed arriving to market at the time of harvest and extrapolating the crop size is only marginally better.  India “guar” export statistics (consumption) are inconsistent.

We would expect that weather, demand and speculation will keep the markets in an erratic mood for the next few months. It would appear that the large supply of seed and relatively weak demand will help keep price movements in check.

Polypro IndoPak Guar Market Report 7-5-16

The Monsoon continues to advance over the guar areas and rain is reported and forecasted for the coming weeks. The market reports that the combination of relatively early monsoon rains and persistently low guar seed prices are supporting the farmers desire to decrease guar acreage in favor of better priced crops like pulses, cotton, oilseeds, etc…  Some guestimates put the decrease at 50%. The IndoPak markets opened the week with spot and forward guar positions trading at a premium over last week. At this early stage, believe it is nothing more than wishful thinking as traders are trying to promote the expectation of higher guar seed prices next year.

Polypro IndoPak Guar Market Update

IndoPak weather reports remain favorable for the guar areas.

As per the IMD today, “Conditions are becoming favorable for further advance of southwest monsoon in some more parts of north Arabian sea, Gujarat, East Rajasthan, remaining parts of Himachal Pradesh, Uttarakhand, West Madhya Pradesh, Uttar Pradesh and most parts of Punjab & Haryana, entire Chandigarh & Delhi and some parts of West Rajasthan during next 3 days.” (Bold print are guar areas.)

Monsoon Season Rainfall

Since, 2005, the Kerala onset date has ranged from May 24 – June 10. Sometime in June the INDIA METEOROLOGICAL DEPARTMENT is expected to issue a detailed long term weather forecast for the season.

June 1 is the historical average onset date of the monsoon over the southern state of Kerala. June 10 is the historical average arrival date in Mumbai, the financial center of India.

Other important benchmark dates regarding the IndoPak guar crop are June 15 (southern edge of Indian guar area), July 1 (Jodhpur), and July 15 (eastern edge of Pakistani growing area). May and June are the time of pre-planting rains. July is pre-planting rain and/or monsoon planting rains. The latest planting date is early-mid August.

3 Things You Don’t Know about Guar Gum

Guar gum, or guaran, is the primary product of guar grains. The guar seeds are dehusked, screened and milled to obtain the gum, and is typically produced as an off white, prolix powder. Here are three things you didn’t know about guar gum:

  1. India is the largest producer of guar gum, with an annual produce of 2.5-3.5 million tons, constituting about 80% of the global production. Other principal areas favoring guar gum’s growth are Pakistan, the US, Australia and Africa.
  2. Guar gum is used in gluten free ice cream as it reduces ice crystals comprehensively by slowing mass transfer across the solid/liquid alloy. It is also effective for making husky pastes without turning them into a gel since it is a hydrocolloid, which is able to thicken hot and cold liquids, prepare heated gels, light froths as an ointment stabilizer. It can also be used for sauces, cottage cheese, frozen desserts, soups and yogurt.
  3. Guar gum is used as a waterproofing agent mixed with other chemicals in the explosives industry. It is also used in hydraulic fracturing or fracking, i.e. for extracting shale oil and gas. 90% of India and Pakistan’s guar gum produce is used by the extraction industries for this process.

These are 3 things you probably didn’t know about guar gum, but now you can see how beneficial the substance is for multiple purposes.

Polypro’s IndoPak guar market report

Conditions continue to favor the buyer. It appears the IndoPak guar market will have little leverage to significantly increase price for long periods of time given the outlook for abundant raw material supply, excess frac gum manufacturing capacity and poor USA O&G frac demand. However, it should be noted that frac gum plants continue to shut down and the amount of “excess” capacity is shrinking.

We have reviewed US guar imports for 4Q2015. There was 30,000 mts of guar imported for all applications. Of that, 25,000 mts (8,333 mts per month) can be reasonably isolated to the O&G frac application. As you may recall, O&G frac imports averaged during the boom closer to 25,000 mts per month. There is talk in the industry about re fracking old wells which might offset some of the lower guar usage due to the predicted rig count decline in 2016.

Please balance our opinions and comments with others.