India may see bumper guar crop as rains restore farmers' optimism

MUMBAI, Sept 13 Thu Sep 13, 2012 6:23pm IST

MUMBAI, Sept 13 (Reuters) - India could turn in a bumper crop of guar this year as a revival in the monsoon is likely to help yields and more farmers plant the seed, lured by the high prices it fetched early this year on strong demand from the global shale oil and gas industry.

Industrial guar gum is used in drilling and in hydraulic fracturing or fracking, to extract gas from shale, which has transformed energy supplies notably in the United States.

India is the world's largest producer and exporter of guar gum, meeting 80 percent of global demand.

"Farmers who never heard of guar have also planted it this time. The area sown has increased significantly across the country and output would also be much higher," said Shikharchand Dugar, a trader from Jodhpur, a key market in Rajasthan.

Besides the top producing states Rajasthan and Haryana, farmers in Maharashtra, Gujarat, Uttar Pradesh and Madhya Pradesh have also grown small quantities of guar, which is usually sown in June and July and harvested in October and November.

Traditionally, guar used to be grown in desert regions spread across Punjab, Haryana, Rajasthan and Gujarat as it requires well-drained soil.

"After attending a seminar (on guar) in my area, I decided to cultivate guar. Prices were very attractive and monsoon forecast was also weak, so all conditions were favourable," said Kailash Bajaj, a 48-year-old farmer from Amravati district in Maharashtra, who has sown guar for the first time.

Bajaj has sown guar seed on more than 7 hectares of land, replacing soybean, and hopes to expand the area next year if he gets good returns.

In late March, local commodity exchanges had halted trading in guar futures amid a regulatory inquiry after prices soared more than ten-fold.

By early August, the market regulator had still not taken any decision on the re-launch of guar futures.

BETTER YIELD ON RAINS

A pickup in September rains is expected to improve the yield of the crop, which is now close to maturity. But excessive rainfall in some areas could, on the other hand, hit the standing crop, traders said.

"Production is now seen higher than last year because of recent rainfall activity. The area under the crop could not be extended but yields would improve," said Purshotam Hissaria, president of the Indian Guar Gum Manufacturers Association.

A lull phase of the monsoon rains during the initial sowing period had restricted the acreage covered.

India's monsoon rains were 21 percent above average in the week to Sept. 12, the weather office said on Thursday, the third straight week of heavier than normal rains, abating the threat of a widespread drought in the south Asian country.

Farmers in Rajasthan had planned to plant a third more guar to take advantage of soaring global prices spurred by oil industry demand.

But sowing was curbed by a lack of seeds after farmers sold so much last year they kept less back for replanting.

To counter this, a few exporters and traders distributed free seeds, although with certain conditions, to farmers to ensure supplies, while in some areas farmers paid hefty premiums to buy high-yielding-quality seeds.

Farmers in the top producing Rajasthan state have so far sown guar on 3 million hectares as compared with 2.76 million hectares a year ago, data on the state farm department's website showed. Last year total acreage under guar in Rajasthan was 3.09 million hectares and output was 1.84 million tonnes.

Traders expect delayed rainfall could push back supplies in the spot market by a fortnight to late October.

At Jodhpur, a key market in Rajasthan, guar seed prices dropped to 7,000-7,500 rupees per 100 kg from a high of 30,000 rupees reached in March, but remain well above a year ago. (Editing by Anupama Dwivedi)

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