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 The monsoon has withdrawn from the guar growing areas.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.