MUMBAI, 5 May 2025: Everyone involved in business have dreams to earn more, everyone has the right to earn more, but traders should also remember that higher the profit has also an equal amount of risk. Farmers should be especially aware of this risk. Because their risk-taking capacity is limited.
That is why options have been launched on the exchange platforms to reduce the risk of farmers and give them the opportunity to fix minimum profits. If we look at the price graphs of guar gum and guar seed futures for the last one month, one will realise that options prove to be very useful tool for farmers when the market is in a recession.
Just a month ago, the price of guar gum per quintal at NCDEX was at the level of INR 10,700, which fell to INR 9,450 on April 30. Similarly, the price of guar seed per quintal was INR 5,500 a month ago, which fell to INR 4,960. Although there is talk that this decline is due to the new burden of tariffs, But here a concern is that farmers' earnings will be washed away. According to exporters, if high tariffs are implemented, the export of guar gum and split will down.
Therefore, the market is in a slump. However, since the implementation of the tariff has been postponed for 90 days, traders have started exporting.
According to business sources, India has exported 28,000 to 30,000 tonnes of guar gum and split in March 2025. If this export demand had not happened, the prices would have been much lower. According to the Commerce Ministry data, India exported 4.40 lakh tonnes of guar gum and guar split in the year 2022-23, 3.88 lakh tonnes in the year 2023-24 and 3.70 lakh tonnes by the end of January 2024-25. If the estimates are correct, exports will cross four lakh tonnes this year as well.
Farmers who bought put options to protect themselves from the impact of the slump in guar gum and guar seed prices have benefited. If we look at the figures, on March 10, about 550 tonnes of put options were bought in the guar seed put options of the exchange. At that time, premiums ranging from INR 25 to INR 225 were being quoted on the exchange for April 2025 delivery.
When the price of guar seed was between INR 5200 and INR 5500, the farmers who bought put options at these rates can calculate their put options buying price at INR 5400 after deducting the premium of INR 100. When the current price is INR 4960, they still earn INR 450 more. Similarly, on March 10, the price of guar gum quoted between INR 10000 and INR 10700. While the premium ranged from INR 100 to INR 525. At this price, 900 tons of put options were traded.
At the current price of INR 9,450, farmers will get money only at the price of INR 10,700 at the time of delivery. This is the unique feature of options, which gives the farmers the right to a certain return on the exchange platform by paying a certain premium.
According to market yard sources, currently an average daily 8000 bags of guar seeds arrivals in the markets across the country. However, the goods that are currently arriving are being sold at low prices, so demand and supply remain intact. In the year 2023-24, India's guar seed production was 9.55 lakh tonnes, while in 2024-25, the production is estimated at 10.50 lakh tonnes. Due to which the prices may also decrease in the coming days.
By Kalpesh Sheth - an comodities expert with years of experience.
