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Higher quotes hit guar gum powder exports — Processors blame futures exchanges for high prices

M.R. Subramani

Chennai , Sept. 23

EXPORTS of guar gum powder have slowed down on sharp fall in guar (Cyanmopsis tetragonolobus) production that has been hit by poor rainfall.

With the production fall leading to rise in guar seed prices, the processing industries are complaining of their units turning unviable. They are, in particular, blaming futures exchanges for the increase in guar seed and gum prices in the last fortnight. However, officials of futures exchanges deny these charges.

Guar (cluster beans) requires two phases of rainfall before sowing, one during budding and one more during blossom. Rainfall failure during budding has resulted in production fall. "This year, production is expected to be three lakh tonnes against the normal six lakh tonnes. Last year, thanks to good rainfall, the production was 7-8 lakh tonnes," a processing industry source said from Jodhpur, Rajasthan.

Guar gum is produced from the seed and this is turned into powder. The powder is used in a host of industries, ranging from bakery, dairy, meat, dressing and sausages, beverages, pharmaceuticals and cosmetics, textile printing, mining, water treatment and paper.

"Exports from the country are to the tune of Rs 700 crore and indigenous sales is Rs 300 crore," said Mr Giridhar Lal Saradha, President of Indian Guar Gum Manufacturers Association.

"There is shortage of crop this year but we feel there is too much of speculation in the futures exchanges which has affected the processing industry," he said.

"Speculation has led to volatility in the market and we are unable to give quotes to our foreign buyers," said Mr B.L. Soni of Shri Ram Gum and Chemicals, Jodhpur. "For example, one buyer came to us and we quoted $1000 a tonne for the powder. By the time he could get back to us after three days, guar seed prices had gone up and we had to quote a higher price thus losing a client," he said.

"Futures trade is a price discovery mechanism and we find the price behaviour normal. During September 1998, the prices had touched Rs 3,000 a quintal for guar. Last year, it ranged between Rs 1,000-2,100 and in 1999, it ruled over Rs 2000," said Mr Narendra Gupta, Chief Business Officer, National Commodity and Derivatives Exchange (NCDEX).

Currently, spot price for guar is Rs 1,880 a quintal. In the futures market, it is quoted at 1,983 a quintal for October delivery, Rs 2,122 for November and Rs 2,223 for December. "See the current and December prices. Because of this, we are unable to make any purchase," says Mr Soni.

"The problem is more acute in the case of guar gum," says Mr Saradha.

The current price for guar gum is Rs 5,469 a quintal. For October delivery, the price is Rs 5,773, while for November and December it is Rs 6,061 and Rs 6,281 respectively.

Officials of futures exchange point out that such charges are being made without understanding the functioning of futures trade. "In futures trade, delivery is negligible as the participants close out their position," said a futures exchange official.

World over, just 0.2 per cent of the total contract is delivered, while in India it is a little higher at 0.5 per cent.

"If any seller says the buyer is unwilling to deliver, let them come to us. We will ensure that the delivery takes place," said Mr Gupta.

According to Mr Saradha, the daily turnover of guar futures is Rs 1,500 crore. "This is higher than the annual turnover of our industry," he said.

"We have done whatever we could to ensure there is fair trade. We have raised margins and told some participants to cut their positions. We cannot be going and telling people to stop trading," Mr Gupta said.

"At least 20 days ago, the prices for guar were ruling at Rs 1,400 a quintal. The users could have utilised that opportunity," he said.

But guar gum powder manufacturers say the high prices have almost stopped exports. "In July, we did trade for $900 a tonne. In August, we quoted $1,000. Now, we cannot suddenly quote $1,500 a tonne," Mr Saradha said.

Futures exchange officials point out to a series of measures carried out in the last two weeks to quieten things. "We are doing our best. The whole system is transparent," they said.

Processors, on the other hand, fear that this could lead to users looking for alternatives such as starch, tamarind kernel powder, especially in textile printing, and carboxy methyl cellulose.

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Higher quotes hit guar gum powder exports — Processors blame futures exchanges for high prices



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