There is a legend about Mehrangarh, the massive fortress with wide battlements and delicately decorated palaces that rises atop a desert hill in Jodhpur, Rajasthan. When Rao Jodha of Marwar began building this citadel in 1459, it is said, a hermit found himself displaced. In his anger the hermit cursed Rao Jodha’s kingdom to suffer drought.

That ancient curse seemed to have lifted when the global oil and gas industry discovered guar (Cyamopsis tetragonoloba), a leguminous plant also called the cluster bean, that is grown by Marwar’s farmers. Afraid that there was not enough guar to go around, buyers from abroad descended on Jodhpur, the price shot up (from Rs 134 a kg in July 2011 to Rs 1,100 in March 2012), and the number of mills to process guar near doubled in those few months.

Still, uncertainty stalks the guar farmers and processing mills around Jodhpur. At Bara Ghurd, a village 70 km north of Jodhpur, an ageing farmer named Nimbaram and his farming brethren know that much is at stake. After selling the last pod of the previous harvest, they bought seed for as much as Rs 300 per kg — a price 10 times what it was last year. The acreage, too, has ballooned, from 100,000-130,000 hectares last year to over 200,000 hectares this year, and the rains have been favourable. When the crop is harvested in about a month’s time, the output may be of record size. In the absence of a government-administered support price, this could mean lower realisation for farmers like Nimbaram, unless demand rises in tandem.

And that’s the reason for the worry lines across Nimbaram’s weather-beaten face. The shale gas industry has emerged as the foremost consumer of guar. To get at gas buried underground in shale deposits requires the hydraulic fracturing, or “fracking”, of the gas-bearing rock. Here guar gum, or processed guar mixed with water, is very useful.

But the demand for guar for fracking is not easy to predict. When Halliburton, the world’s largest provider of hydraulic-fracturing services, said in June that its operating profit margin dropped because the company had purchased too much guar gum too early and at high prices, the tremors were felt in Jodhpur — India grows about 80 per cent of the world’s total guar crop. If buyers like Halliburton are already sitting on substantial guar gum inventories, they are not likely to buy more — and certainly not large amounts. P K Hissaria, president of the Indian Guar Gum Manufacturers Association, reckons that demand will probably shrink 25-30 per cent this year. “That’s mostly because companies stocked up earlier, so few will come back to the market now and buy large quantities.” Millers say guar gum prices have slumped from the high of Rs 1,1010 a kg in May to Rs 280 now.

Nimbaram is sitting on his haunches in the middle of the 35 bighas that he owns. “We usually just grew guar to feed our cattle, and nothing else,” he says. “That was mostly because the prices were always so low. All I know is that when the prices started going up, we sold the few quintals of guar that we had stocked up at home.” After the thrill of a once-in-a-generation boom, now there is trepidation.

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Guar is popular in the sandbowl of Jodhpur because it is hardy. “[The guar seed] stays for many, many years, sometimes even 10-12 years. It doesn’t spoil or attract insects. Since, every three or four years, there is a drought in Marwar, every house here would always store some guar for the bad times,” explains Nimbaram.

An unusual chain of events transformed this cheap bovine breakfast into India’s most valuable agricultural export in less than 12 months. Last year, India sold 706,966 tonnes of guar gum for Rs 16,356 crore in the international market. That was nearly 20 per cent of the country’s total farm exports by value. Guar trounced more illustrious, and usually more expensive, crops like basmati rice. The year before, guar gum was only 7 per cent of India’s total farm exports and in 2007-2008 a mere 1.4 per cent. Everything was scooped up by eager buyers. Today, little of the legume is available in the houses of Bara Ghurd or, for that matter, in villages across much of guar-growing Rajasthan.

The madness had a single obvious trigger: demand from the shale gas industry, primarily in the United States. Having discovered commercial viability halfway through the last decade, shale gas production in the US has risen to about 23 per cent of the country’s total dry gas production. (Dry gas is natural gas that occurs in the absence of condensate or liquid hydrocarbons.) With growing gas production came a rising demand for guar gum, which continues to be the preferred hydrocolloid, a substance that forms a gel when mixed with water, for the shale gas industry. For most farmers, this boom did not change life. Few had foreseen the price surge. A feeble monsoon last year meant that the guar crop was weaker than usual and only a handful of rich farmers had the courage to hold their stock till prices began spiralling upwards. So there are no opulent houses, shiny new SUVs or satellite television dishes here.

In a carpeted, air-conditioned room, with a flaking ceiling that sends down occasional showers of plaster, Ram Gopal Sharma, deputy director of the department of agriculture in Jodhpur, categorically denies that guar farmers within his jurisdiction of 1.2 million hectares of farmland saw unprecedented profits when the prices spiked. “By the time the prices went up to Rs 70 per kg around December, 98 per cent of the farmers here had sold their crop and exited the market,” he says with authority. “Very few farmers would have made more money than that.”

It is not as if Sharma is unhappy with what has happened. “Anything above Rs 40 is profitable for them,” he explains. “Even though seed prices have gone up, if the market remains tight at least my farmers will get something.” There is, however, a distinct sense of anxiety that cannot be ignored. “Earlier, guar was never planted in irrigated areas. For the first time, it has happened this year, even though seed prices can be as high as Rs 320 per kg,” Sharma says. He has been approached by government departments from Karnataka to help with guar cultivation. Could there be a glut in the market? Nimbaram may not fully comprehend the dynamics of the market, but he knows that all is not well.

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Om Prakash Soni wears a slick, black, ceramic Rado watch, has a massive world map on the wall bearing the name of Maersk Sealand, a major global shipping firm, and sits under a panoramic photograph of New York’s Brooklyn Bridge. They are symbols of his prosperity and of the nature of his business, but Soni, CEO of Shree Ram Industries, one of Jodhpur’s biggest guar gum manufacturers, fears that many of his American buyers have left the once-roaring market for the time being.

“I saw so much madness for the first time in my life,” says Soni, “An atmosphere was created where people were made to believe that there was a supply glut, so demand suddenly rose. But prices have dropped and I wouldn’t be surprised if they went down further.”

The scramble for guar, Soni says, was fuelled by speculation. “After April [this year], the companies suddenly found out that there was no crisis, so the prices crashed. Before that, I had an American coming to my factory every second day asking for all my guar gum.”

The Associated Chambers of Commerce and Industry of India, or Assocham, in a scathing press release on March 28, asserted that only manipulation could have been the reason why “the prices of guar have gone up 120 per cent in the past one month, 700 per cent in the past four months, 875 per cent in the past 12 months and 1,300 per cent in the past 18 months”. “The price manipulation is unbelievable,” says S K Jindal, the chairman of Assocham’s investments committee. “The normal price of guar bean in the season is Rs 10 per kg, while guar seed is traded at Rs 25 per kg and guar gum at Rs 50 per kg. Unfortunately, due to a fraud being played by a few rogue traders, the prices were increased to Rs 291 per kg for guar seed and Rs 959 per kg for guar gum on March 21.” The Forward Markets Commission banned futures trading in guar in March; it has not lifted the ban yet, though prices have softened. The scourge of rogue traders is yet to be overcome.

It is in Basni, a sprawling, pot-holed and partially waterlogged industrial complex on the outskirts of Jodhpur, and a handful of adjoining areas, that nearly 40 per cent of the world’s guar gum supply is processed and from where it is exported. But now the wide streets are bare of trucks, industrial units stand shuttered, tea stalls look deserted, and T C Baid, partner in Vimal Guar Gum Mills, sits in a nearly deserted factory, occasionally checking commodity prices on his desktop computer.

“Nearly 90 per cent of units here are closed now because there’s just no stock,” says Baid, also president of the Rajasthan Guar Dall Manufacturers Association. “Everything that was available has been processed and passed on. So, we are sitting here and waiting for the produce to come in.” Since guar has a good shelf life and there’s no local consumption, mills would usually have some amount of it coming in throughout the year, explains Baid. “But this year, the prices went so high that everyone sold everything that they had.”

That’s not the only reason for the strange silence in Basni, though. The short-lived boom in an unregulated commodity attracted large amounts of money rather swiftly. “A lot of industry has now come in here,” adds Baid, “That is bound to lead to some saturation.”

The numbers tell the same story. In 2011-12, according to officials from the Rajasthan State Industrial Development & Investment Corporation, the state agency that develops land for industrial units in the state, about 30 new guar processing units were established around Jodhpur. Given that the number of existing facilities is between 70 and 80, that is a significant increase in competition. “We have a lot of players now in a market where one doesn’t quite know what’s going to happen,” says Soni of Shree Ram Industries, referring to the uncertainty over the demand from the shale gas industry. “When the demand came, I got caught in the excitement and doubled my capacity. From six production lines, I made it 12. Right now, demand is so poor that I have only one or two lines working.”

Has the curse of the displaced hermit come back into force?