MUMBAI (REUTERS) - India's output of guar, a tiny seed with an outsize role in shale gas extraction, will rise this year as farmers boost planting acres in hopes of good rains, against a backdrop of attractive prices and resumption of futures trade, traders said.
India, the world's top producer and exporter of the seed, fills 80 per cent of world demand for guar, which thickens the slurry of water, sand and chemicals pumped into wells during the hydraulic fracturing process used to tap oil and gas from unconventional shale plays.
The United States, whose shale gas surge has transformed it from the world's largest gas importer to a budding exporter, is the top buyer.
India's western desert state of Rajasthan, which contributes more than 80 per cent of the country's output of guar, produced 2 million tonnes in 2012.
Planting acreage of the crop will go up by 5 to 10 per cent this year, Shikharchand Dugar, a trader from Jodhpur, a key market in the state, said, although it was too early to forecast output.
"Sowing is definitely going to be higher because prices are attractive," Dugar said.
"No other crop would give this much return."
Guar also brings in better returns than other cash crops, such as cotton, or lentils, because it is less labour-intensive, needs less fertiliser and helps improve soil fertility.
Farmers plant guar in the rainy months of June and July, during India's monsoon season. The weather office has forecast average rains this year after the monsoon hits Kerala on the southern coast on June 3.
India's exports of guar gum from January to April more than doubled to 268.42 billion rupees (S$ 6 billion) over the same period last year, government data show.
Prospects for the export of guar gum have brightened as fracking is increasingly viewed as a technology with the potential to change the geopolitics of energy, thanks to its dramatic boost to North American domestic gas supplies.
Guar prices are now hovering around 8,750 rupees per 100 kg, well above the cost of production, said Surendra Kumar Yadav, another trader from Rajasthan.
The resumption of futures trading would also help farmers ascertain prices, said Badruddin Khan, associate vice-president of research at Indiabulls Commodities Ltd, a Mumbai-based brokerage.
On May 14, India's market regulator lifted a ban on guar seed and guar gum futures that was more than 13 months old.
Authorities suspended the trade in March 2012 after prices spiked more than 10-fold on strong overseas demand from the global shale oil and gas industry.