Challenges, threats before guar sector

Guarseed and guar gum prices rose to a record high during 2011-12. The rise was attributed to high demand from the US, which further lead to speculation in the domestic market.

Though such phenomenon may not be considered good for the industry, it has resulted in attracting the attention of researcher and analysts. Over the years, the guar market has grown manifold.

Also, there has been a major shift in usage pattern of guar gum by various industries.

Till 2005, there was no intensive use of guar gum powder for drilling oil and gas. Thus, a major chunk of the demand was for food grade guar gum powder (50 per cent) followed by Fast Hydrated Gum (FHG) grade (30 per cent) and other such as paper, textile, cosmetics etc. (20 per cent).

Currently, a major chunk of demand is for FHG grade (70 per cent), followed by food grade (20 per cent) and other industrial grade (10 per cent).

Prices of guarseed and guar gum are highly correlated with withdrawal of shale gas by the US. Such major dependence on a single industry has put forward challenges and threats which need proper addressing.

Proppant placement in hydraulic fracturing is accomplished by using either high pump rates or by using high viscosity fluids.

Thus guar gum powder is used by shale gas industry for increasing the viscosity of proppant. However, due to high uncertainty in guar gum market, the industry may slowly shift to using slickwater, which requires minimal usage of guar gum. In recent years, mounting opposition from the public in the US against oil and gas drilling has made the future of the fracking industry uncertain.

Though protests are not expected to bring any sudden change, it could result in growth of oil and gas drilling industry slowing. Apart from these, alternative polymers which may be used as gelling agent such as LFC-C4 developed by Independence Oilfield Chemicals, UK, and many other such derivatives developed by other companies may compete with guar gum in the days to come.

Considering such threats to the industry, it is necessary to diversify to different countries and different user-group industries.

Also, the industry must put in extra effort on focussed R&D to explore potential alternative usage of guar gum. The guar gum user industry was hit by rise in prices during 2011-12.

Price stabilisation is one of the major challenges for the industry. Price fluctuation has created uncertainty among guar gum users. Such uncertainty may compel users to look for alternatives.

Production of guar depends heavily upon monsoon as the crop is grown mainly in rain-fed areas of Rajasthan.

Not only sufficient, but also timely rainfall is required for better production. Such dependence on monsoon makes it difficult to forecast its production. During recent years, the industry has built a huge inventory of guarseed. Dependency upon inventory of seeds may inflate the price of end product but at the same time ensure continuous supply. The industry has to ensure a price which is profitable to them as well as affordable to end users.

Guar gum is mostly sold according to specification stipulated by the end user. It is very essential for the industry to match the quality standard especially for food grade of guar gum. According to an industry source, a little contamination in guar gum powder may lead to heavy consequences such as withdrawal of product from the market, damage of goodwill and cancellation of licence, especially in the European market. The industry must maintain standards so as to safeguard the interest of the user industries.

User industries such as oil and shale gas, requires specific derivatives of guar. The normal guar gum powder doesn’t qualify to serve the purpose of shale gas industry effectively. Specific derivatives of guar gum powder are required. Currently, such derivatives are produced only in a few countries such as the US and China. Indian processors are yet to start supply of specific guar gum derivatives.

The writers are associated with CCS National Institute of Agricultural Marketing, Jaipur.