The prices of guar family, guar gum and guar seeds, have fallen around 15 per cent in the past one month due to higher acreage and production estimates for the present season that was affected by lacklustre domestic and export demand.

Guar gum prices since July 21, 2010, are witnessing correction due to expectations of improved production of guar seeds in financial year 2010-2011 after lower production in financial year 2009-10.

Anand James, chief analyst at Geojit Comtrade, said, “India’s guar gum output is likely to rise to 10 lakh tonnes in financial year 2010-11, a far cry from around 2.5 lakh tonnes produced in last year.”

India is the largest producer of guar seeds, lead by Rajasthan that accounts for more than 70 per cent of the total produce, followed by Haryana and Gujarat. Production of guar seeds is estimated to touch almost 1 million tonnes, almost three-fold increase compared with the past season. According to weather department data, rainfall in the eastern parts of Rajasthan was 36 per cent more than normal in the week ended August 4, while that in the western part, the rainfall was 198 per cent above normal.

The pressure on guar seed prices is likely to continue till next season. “According to expert estimates, there will be 40-45 lakh bags of guar seeds in stockiest hands as balance and after calculating 10-15 lakh bags demand until the new crop arrives, we might open with 30-35 lakh bags as opening stock for the next season, which also indicates pressure at higher levels,” said Vibhu Ratandhara, assistant vice-president at Bonanza Commodity Brokers.

Guar gum prices are expected to trade lower as the demand from overseas continues to remain sluggish. Nalini Rao, research analyst at Angel Broking, said, “Increase in the acreage towards guar seeds in Rajasthan is supporting bears in the domestic market. Any revival of demand from the overseas buyers for guar gum will support prices to strengthen in the medium term that is from the middle of September onwards.”

Guar gum exports have declined since July according to the spot market traders because the buyers are following a wait-and-watch stance and waiting for the prices to stabilise.

In addition, lower demand of ‘churi’ and ‘korma’ provided support to the bears. According to experts, by-product demand generally is lower during the monsoon season due to easy availability of green grass, the best substitute for cattle feed.

From an investor’s point of view, “Guar gum offers short-term profit- making opportunity. Investors can make use of brief anticipated rallies to Rs 4,900 per quintal, and can enter longs at present 4,500-4,550 levels,” James added.

Technically, “Guar gum prices shall find immediate support at Rs 4,450 per quintal, and thereafter at Rs 4,350 per quintal. The immediate resistance could be seen at Rs 4,800 per quintal and Rs 4,900 per quintal,” Nalini Rao said.

However, in the short run, guar seed for September contract at the National Commodity and Derivatives Exchange (NCDEX) is seen towards Rs 2,000 per quintal in the coming days,” Ratandhara added. At present, the price trend is bearish for guar gum. Selling at higher levels will be advisable in the coming days.

On Friday, guar gum and guar seeds were trading at Rs 4,515 per quintal and Rs 1,990 per quintal.