Polypro IndoPak Guar Gum Market Report – November 30, 2017

 

Harvest of the IndoPak guar crop is progressing nicely.

The U.S. guar imports were 20,500 metric ton in October.  To recap, Jan-Sept imports totaled 197,000 metric ton to average 21,900. Jan was the low month at 13,400 and May the high at 31,200.

Pricing has firmed since the last report. At this point, it appears that seed arrival is not the root cause of the price increase.

Guar seed arrivals in India are graphed in the attached. (India guar seed) Looking at the first 5 weeks, 2016 arrivals averaged 45,000 bags per day vs 2017 average of 49,000 bags.  The arrivals represent guar seed that passes through the physical trading market yard. Guar manufacturers, stockists, speculators, etc…have agents located at their preferred market yard. For example, if there are 50 major market yards spread over the whole guar growing area, a manufacturer may have an agent in just 5-10. Those agents keep in contact with the remaining yards and provide daily feedback on arrivals, quality, price and competition. The reliability of the seed arrival count is suspect but it is the practice in place. Some manufacturer’s report higher arrivals and some lower. The graph represents one manufacturer. As you may recall, the sudden drop off in 2016 was attributed to liquidity issues related to the demonization of 500 and 1000 Rupee notes.

The first 100 days of the season are generally the peak arrival period.  You may recall the old rule of thumb, that 80% of the crop would trade hands in the first 100 days. Many years ago it was revised to 50% as wealth increased on the farm. If the 50% rule holds, a 9 million bag crop will trade an average of 45,000 bags per day for the first 100 days. We are averaging 48,750 bags per day for the first 56 days.

Some manufacturers are floating the idea that the new crop might not be as large as they originally forecasted.  So far the revised numbers are down ~10 percent from the original estimate.  The original estimates on the total amount of raw material (new crop and carryover) from India ranged from 17-23 million bags with consensus at 17-19 million bags. Worldwide export demand from India was 12 million bags or 300,000 metric tons of powder equivalent for 2016.  We forecasted that worldwide demand will likely hit 14 million bags for 2017 and 2018 demand looks like a repeat given O&G is forecasted to remain strong.

Please balance our comments with others.