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Morristown, NJ -- October 10,
2005
The Saturday 7.6
earthquake which struck (India and Pakistan)
Kashmir and Pakistan's Northwest Territories did
not directly affect our colleagues, their
workers or extended families. The guar producing
areas have not been affected. The reports are
that up to 2.5 million people have been left
homeless, and the mountain winter arrives in one
month. Our Pakistani business colleagues are
taking a very active role in setting up tent
encampments and organizing relief supplies
deliveries.
If you are moved to help, please donate through
one of the reputable international agencies,
such as the Red Cross (
click here
)
GUAR MARKET REPORT…
"After all is almost said and done…"
This year the guar "rollercoaster ride" of peaks
and valleys was amplified by the over-reaction
of the new Indian guar commodity exchange. On
some days, 10 times the annual crop changed
hands! We experienced a period of dramatic and
sudden changes in outlook:
• Expectations for an outstanding irrigated crop
withered under May heat.
• After some delay, the monsoon rains provided
excellent coverage for the growing areas.
Combined with attractive seed prices, a bumper
crop seemed quite possible.
• August and early September were the toughest
months, with drought depriving seedlings of
essential second rains. Each day brought fresh
reports of dying cultivations and dire
predictions of a crop outcome. The market rose
over 40% from its lows.
• On September 9, the Indian Meteorological
Service reported that the monsoon had withdrawn
from the guar producing regions.
• September 9 evening: in spite of the
pessimistic forecast it began to rain, and rain,
and rain…"too much", said some, "too late" said
others.
We now have a number of survey reports which
finally provide quantitative guidance as to the
accurate state of affairs. Please contact us if
you want region-by-region substantiation, but
read on for the "bottom line!"
Projected India Seed Crop + Carryover: 4.5
million + 3.0 million bags = 7.5 million bags
of 100 kgs each (splits/powder production
potential of up to nearly 200,000 MT, although
there is normally at least 1 million bags of
carryover).
Projected Pakistan Seed Crop + Carryover: 1.6
million bags + negligible good quality carryover
– a well above average 1.6 million bags of 93
kgs net each (splits/powder production potential
of up to 40,000 MT).
(2004 Crops by comparison: India 4 million bags
crop + 5 million bags carryover = 9 million
bags; Pakistan average crop and negligible
carryover).
Global Demand: 650,000 MT seeds +/- 10%.
OBSERVATIONS:
a/ Unless there is an unusual (once per decade)
negative weather event, it appears that the crop
will be sufficient to meet global demand
b/ The smaller differential between supply and
demand as compared to late 2004-2005 may enable
speculative forces to increase the range of
price swings in reaction to market news on
either the supply or the demand side.
c/ There should be enough guar, but prices can
readily fluctuate +/- 15% from present levels,
dependent on short term phenomena and resultant
speculation.
RECOMMENDATIONS:
a/ Purchasing can probably be done according to
real needs and normal inventory level
requirements.
b/ Shorting the market may require making
purchases at unfavorable moments. The upside
potential this season of such a strategy does
not appear to be worth it.
Please contact PLT should you wish to discuss
any of the above report. We put out the report
to the best of our knowledge and based on
information from multiple sources.
Best
regards,
Paul Flowerman
President
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