The recession of 2008 through 2010 had impacted the guar market. Demand was considerably reduced due to lack of industrial activity and prices had dropped relative to previous years. The very low crop production of 2010 had little effect on the market since demand had slowed significantly.
In 2011, as the world economy came out of recession, the guar market saw several new developments. Firstly, Weather and monsoonal rainfall were quite favorable for the 2011 guar crop and a very good crop volume were produced. Secondly, the demand was restored by the historical users who had re‐bounded to the pre-2008 level. Oil service companies and drilling companies brought new technology on line. The use of hydraulic fracturing to follow long horizontal drilling in tight shale formations was kicking into high gear after several years of development. By the summer of 2011 guar demand from the fracturing market was growing strong and the guar beans were being harvested prices for guar products had reached unprecedented price levels.
Pricing was heightened by a bottleneck in supply. All guar powder producing plants were running at full capacity by October – November 2011. Pricing of guar products led the manufacturers to increase their capacity by 60% in November 2011
As the demand was high in the late part of 2011, the industry witnessed new people coming into the market to manufacture and supply the product. The industry also attracted speculators during the same time. Some were already experienced players and some were new comers. While new players were getting associated with the industry and old players were running at full capacity,the crop export reporting agency in India made a serious error in over‐reporting the volume of guar going out of the country. With the combination of increased demand and a serious lapse in report gave speculators the advantage of pushing the prices further on the market.
Panic on the consumer side also led to pricing frenzy. Service companies could not fulfill fracturing contracts without supplies of guar. Due to high capital and labor investments by the service companies; they could not afford to allow shortage of one reagent, guar gum, to idle their trucks, pumps and crews. Purchasing managers chased the limited producing capacity of the milling plants, often with multiple inquiries that gave a false sense of even more demand. By March of 2012 prices had reached levels nearly 10 times the historical average.
In the spring of 2012 with prices at its peak, the farming community in India were geared up to take advantage of the high priced guar. Initial reports indicated a possibility of 30 million bag crop before the planting season . The first forecast of the monsoon season reported normal rainfall and by May, with the continued good forecast, many farmers with irrigation capability were switching to guar growing. The market was expecting a large crop production. At the same time, there was a significant increase in milling capacity
The Indian government in early 2012 was investigating the huge run‐up in guar prices. Significant irregularities and violations in trading policies were found which led to guar gum being pulled off the NCDEX.
Prices dropped significantly and a full market crash was expected by summer of 2012. Service companies found themselves with full warehouses of very expensive guar that was having profound negative effects on their bottom lines. Defaults on higher priced contracts were reported. It was expected that after the Diwali holidays in November, at the height of the guar bean harvest, the market price would descend further.
While this did not happen, many players in India needed to keep the prices up. Farmers withheld beans from the market to achieve the record high prices in order to cover bank loans on equipment. Manufacturers needed higher prices to cover the costs of raw materials in their warehouses. And overall everyone in India expected that the demand must recover to the levels erroneously reported the year before.
And Now the Indian Government decided to relaunch Guar in NCDEX on 14th May 2013 , to control its price trends and market.