The NY Times tells us more than we ever hoped to know about guar, an odd bean grown in India that has become central to the world's energy boom. They also deliver an unwitting tribute to the famous Invisible Hand of the marketplace:
In Tiny Bean, India’s Dirt-Poor Farmers Strike Gas-Drilling Gold
LORDI, India — Sohan Singh’s shoeless children have spent most of their lives hungry, dirty and hot. A farmer in a desert land, Mr. Singh could not afford anything better than a mud hut and a barely adequate diet for his family.
Halfway around the world, earnings are down for an oil services giant, Halliburton, because prices have risen for guar, the bean that Mr. Singh and his fellow farmers raise.
Halliburton’s loss was, in a rather significant way, Mr. Singh’s gain — a rare victory for the littlest of the little guys in global trade. The increase in guar prices is helping to transform this part of the state of Rajasthan in northwestern India, one of the world’s poorest places. Tractor sales are soaring, land prices are increasing and weddings have grown even more colorful.
“Now we have enough food, and we have a house made of stone,” Mr. Singh said proudly while his rail-thin children stared in awe.
Might this foretell global shortages of guar? Unlikely, since this seems to be a desperate, grow-anywhere bean and the locals are pushing hard to expand and stablize production:
For centuries, farmers here used guar to feed their families and their cattle. There are better sources of nutrition, but few that grow in the Rajasthani desert, a land rich in culture but poor in rain. Broader commercial interest in guar first developed when food companies found that it absorbs water like a souped-up cornstarch, and a powdered form of the bean is now widely used to thicken ice cream and keep pastries crisp.
But much more important to farmers here was the recent discovery that guar could stiffen water so much that a mixture is able to carry sand sideways into wells drilled by horizontal fracturing, also known as fracking.
The fracking boom in the United States has led to a surge in natural gas production, a decline in oil imports and a gradual transition away from coal-fired power plants. Fracking may also have spoiled some rural water supplies and caused environmental damage in parts of the United States, but it is hard to find anyone in Rajasthan who sees fracking as anything but a blessing.
“Without guar, you cannot have fracturing fluids,” said Michael J. Economides, a professor of engineering at the University of Houston who is a fracking expert. “And what everybody is worried about is that there is virtually no guar out there now.”
Now, an international effort is under way to ensure that guar supplies come closer to meeting the soaring demand, and hundreds of thousands of small farmers here have been recruited in the effort. Leading the way is Vikas WSP, an Indian company that specializes in the production of guar powders.
Many farmers sold their seed stock last year when prices shot up, so Vikas has held rallies in small towns to pass out free seeds, including new high-production hybrids. The company persuaded farmers with irrigated land in the state of Punjab, north of Rajasthan, to plant guar in the spring instead of cotton. That crop is now coming to market.
And Vikas signed contracts with farmers guaranteeing a return of nearly $800 per acre if they planted guar, no matter what this year’s monsoon brought.
“Whatever they produce, we will buy,” said Sanjay Pareek, a Vikas vice president.
Anticipating a heavy crop, Vikas is more than doubling its processing capacity by building two new plants in Jodhpur, the second-largest city in Rajasthan. By next year, the company will be able to produce 86,400 tons of guar powder each day, it said. Smaller producers are taking similar steps.
“Last year was an extraordinary year,” said S. K. Sharma, managing director of Lotus Gums and Chemicals in Jodhpur. “In 35 years in this business, I’ve never seen that.”
Mr. Sharma said his company would soon open a second plant dedicated entirely to serving gas companies, adding that he was cautiously optimistic that guar prices would remain robust. “But we know there are efforts to grow guar in China, Australia, California and elsewhere, and it has us worried,” he said.
The guar will get through, so frackers and ice cream eaters can resume not worrying about it.
And missing from this story, at least for now - any mention of Obama's bold international effort to stabilize guar production. The Times almost makes it seem that rising prices signaled the market to increase production, despite no prodding from Team Obama. Nahhh, they didn't grow those beans...