I read an amazing stat this weekend: Farmers in the Indian state of Rajasthan are growing 11 million acres (4.5M HA) of guar this year! That’s a pretty staggering figure considering that Texas grows just 6M acres of wheat—which is considered a large-scale commercial crop (and Texas is twice the size of Rajasthan). As it turns out, guar was India’s largest agricultural export to the U.S. in 2011, according to the USDA Foreign Agricultural Service.
Guar has been grown in Asia for centuries. Guar beans are eaten by people and animals (cattle primarily). In the US, refined guar gum is used for various food purposes including as a stiffener in soft ice cream, a stabilizer for cheeses and instant puddings. However, it remained a niche crop until the boom in natural gas drilling tripled demand for the crop. In hydraulic fracturing (or fracking) guar gum powder helps thicken the water that is pumped into the ground to shatter the rocks, releasing oil and natural gas deposits. Demand increased, prices went up and farmers followed by planting the crop in large numbers.
However, there are less obvious and more significant reasons for the guar explosion.
- It’s easy to grow: Guar is less labor-intensive and needs less fertilizer than other cash crops like cotton or lentils. Importantly, farmers in Rajasthan have been growing guar for a long time and knew best practices to generate good yield.
- It has multiple benefits: As a legume that fixes nitrogen, guar has the added benefit of being an excellent soil-improving rotation crop for cotton, sorghum and other vegetable crops.
- It’s easy to process: Splitting and dehulling guar beans is a relative inexpensive and straightforward process. There isn’t an expensive biorefining process that takes money out of the farmer’s pocket.
- There are large and growing downstream markets: With natural gas and food markets needing guar, farmers feel comfortable that their hard work will result in a profitable venture.
In other words, it is not just demand and price that matter, but also a robust ecosystem that incentivizes farmers to grow the crop. In an earlier post I discussed how TerViva’s first commercial crop, pongamia pinnata, has similar dynamics. Read more about it here (it just might be the next 10 million acre crop!).
Sudhir Rani is TerViva’s CFO.