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30 March, 2015 16:08 IST
Guar grower`s anxiety on the rise as market regulators seek to cap procurement prices
Source: IRIS | 16 Jan, 2012, 05.21PM
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The guar crop is delayed this year and around 40% of the new crop is yet to reach market yards. There is a concern among farmers that due to regulatory actions aimed at artificially suppressing the prices, their produce will sell at relatively low prices, and once they are out of the picture, stockists, millers and exporters would make most of the price rise. With a huge surge in demand for gaur, especially from the international markets the price of the crop has also been growing steadily. The biggest beneficiary of this price rise is the farmer. However, due to some recent actions by the regulators, this margin to the farmers is now threatened.

 This rise in price is attributed to the new found usage of Guar Gum in the crude oil industry. Gaur Gum is used in the process to remove sand from crude. This is apart from the large application in the processed and packaged food industry.

Recent boom in Guar prices has changed the landscape of barren lands of Rajasthan`s deserts. In areas where nothing useful can be grown, guar has emerged as a ray of hope for the troubled farmers. A commodity that was for decades favored lesser than its better known rivals like Cotton and pulses is giving them phenomenal returns.

Commenting on the issue, Ratanlalji Daga, Adhyaksh, Kisaan Sangh, Jodhpur,  said, ``Despite the fact that all the genuine stake-holders are benefitting from the price rise, it`s a matter of great concern that the commodity market regulators have imposed excessive additional margins just to safeguard the interest of some speculators who have nothing to do with the actual product. These people have shorted the commodity just because they thought the prices were too high for their liking, without taking the pain of understanding the fundamentals. Most of these people have no stock of guar seed to deliver at the time of expiration and just want to play in the market to make some quick bucks.``

However, such is the thrust of actual demand that despite margins as high as 43% on the long side, prices still continue to climb up. Often unscrupulous speculators panic in the face of prices going against them and begin to exit in panic, this further causes the markets to move up and at times hit daily limits, a pattern sometimes mistaken as price manipulation by the buyers. In fact, extra margins should be imposed on short sellers who have no physical commodities to hedge against and no stocks to deliver against their sell obligation. To add, looking at the price trend, shorts are a bigger financial risk to the exchange and brokers.

Worldwide, when all countries try to promote the commodities where they have comparative advantage, like Indonesia/Malaysia (Palm Oil), Brazil/Argentina(Soya oil) and Ghana (Cocoa);  Indian authorities are trying their best to demoralize the stakeholders in a commodity where India has a virtual monopoly. At one hand the exchequer is spending crores of rupees in form of various subsidies to farmers, seed programs, wasteland utilization supports, minimum support price and expenses involved in procuring, moving and storing the produce. On the other hand, the market regulators, despite knowing the fundamentals are squandering this golden opportunity for the country.

``It is high time that good sense prevails and the regulators let the market function freely and find its equilibrium.  Then only there will be incentive for the farmers to grow more, for the traders to trade more, millers to mill more and for the exporters to export more of this commodity which has the potential to be a golden goose for the country,`` added Daga.

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