Guar prices shoot up 40% in 2 weeks as farmers form cartel and hold on to stocks

Last Updated: Wed, Dec 05, 2012 21:51 hrs

Guar seed and gum prices have shot up nearly 40 per cent in a fortnight after farmers decided to hold the stock of seeds. Farmers decided to form a cartel after prices fell below Rs 9, 000 a quintal for guar seeds and Rs 25,000 a quintal for gum. Following the holding of stocks by farmers, prices of guar seed and gum are now quoted in the Jodhpur mandi at Rs 12,500 and Rs 35,000, respectively.

Guar prices have been falling for the past three quarters after the commodity regulator, the Forward Markets Commission (FMC), banned futures in guar seed and gum. Prices have seen a high of Rs 3,000 for seeds and about Rs 1,00,000 for gum.

Due to much higher returns seen in these small commodities, more guar was sown in the kharif crop. However, by the time the new crop started coming into the market, prices were falling. Now, farmers are getting together and hoarding seeds to sell these at the price they want. They have found a leader in the chairman and managing director of India’s largest gum producing group, Vikas WSP, B D Agarwal, who recently issued an advertisement in Rajasthan’s leading regional newspaper asking farmers not to sell as the prices are likely to go up further.

When contacted on, he said that ban on guar futures had hurt farmers’ interest and that futures on guar should be resumed. He said, “We have organised a farmers’ rally on December 23 at Jodhpur, where we expect 500,000 farmers to come. I have suggested farmers not to resort to distress sale of guar at lower prices.”

On the other hand, traders and exporters oppose futures trading on guar. They have been sending representations to the government to this effect. When asked about the resumption of guar futures, an FMC spokesperson said, “Our advisory committee has supported futures trading on guar seeds and gum. There were some issues with exporters. To sort that out, consultations are going on.”

In FY12, guar gum was the top performing export commodity with export of about 700,000 tonnes worth $3 billion.

The Directorate General of Foreign Trade (DGFT) is the export regulatory and registration authority. Among other issues raised by exporters, FMC will seek from DGFT the quantum of exports. DGFT is understood to have said it will hold consultations with the Rajasthan government and all stake holders, including FMC, before giving its opinion on resuming futures in guar.

Meanwhile, in Jodhpur and Bikaner, the two major guar mandis in Rajasthan, there has been rampant dubba trading of guar. Agarwal of Vikas WSP said, “There is an urgent need to re-launch guar futures. Else, efforts to depress guar prices through rampant illegal guar futures will hurt farmers.”

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