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Guar: Cheap oil gives new company new problem

BROWNFIELD – A tiny bean that saw some big trouble last year is back in business.

But while Brownfield’s guar-splitting operation is under new ownership and growers’ claims are settled, low oil prices mean the legume’s future is not exactly worry-free.

Guar’s main use is in hydraulic fracturing, or fracking. And like everything else tied to the oil industry, guar has an anxious eye on collapsing oil prices.

“The demand for guar is tied to the number of oil rigs doing fracking, which is tied to the price of oil, which is down. Consequently, demand for guar is down,” said Edgar Montalvo, chief financial officer and general manager for Guar Resources, LLC.

Same plant, new company

Guar Resources obtained ownership of the bankrupt West Texas Guar during a reorganization plan in November. The agreement also contained a settlement for growers whom West Texas Guar had failed to pay for their 2013 crop.

“We’re a completely new company — new owners, new vision,” said Cole Vestal, director of agriculture.

Guar production involves splitting the beans, then refining them into a powder. While about a dozen U.S. facilities can process the splits into powder, the Brownfield plant is unique with its splitting ability.

Two other companies, United Guar and Southwest Agriculture, are in different stages of preparing to open splitting plants.

As a crop, producers like guar because it demands little water and — like all legumes — releases nitrogen into the soil.

“Guar would be a great crop, depending on the economics,” said Lynn County farmer Curtis Erickson. “If they could get contracts up to a reasonable price, it could probably be the best crop we could plant.”

Erickson was one of the Brownfield guar company’s few contracted growers for 2014. As Guar Resources had barely claimed ownership, staff exchanged payment for his crop almost immediately, he said.

“One year it took 14 months, and the next year it took 45 minutes,” he said. “We got paid when we should have been, and everything was handled perfectly on their end.”

Erickson said he understands if some farmers still associate the business with the one that denied their paychecks two years ago. He wishes to remind those folks that although the brick-and-mortar facility and a few of the lower-level employees are the same, not much else is.

“I’m sure a lot of people are gonna be hesitant and rightfully so, but I can speak for the new ownership,” he said. “I’d say the ownership is good as far as I’m concerned.”

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The future

Guar Resources is in the early stages of a $250,000 capital-improvement project. Management plans to demolish the south barn, then, through the help of local contractors, build a new facility.

Meanwhile, they’re watching the market as oil prices rise and fall. Where the price will be when planting time starts will essentially determine the payment the company will offer growers.

“It’s a moving target, and we want that stability before we offer a price,” Vestal said.

Forming the contract price too soon could disappoint farmers if management sets it too low and the market rebounds. Setting it too high, on the other hand, could break the company if oil prices tank further.

That’s why they’re not rushing.

“It’s in everybody’s best interest if we hold off until we can find a contract price that’s gonna be win-win for everybody,” Montalvo said.

Farmers’ choices

Even if the contract price is eventually set on the high side, guar’s status as an uninsurable crop still gives it risks, said Walt Hagood, who farms in Lynn and Lubbock counties.

But then again, cotton prices aren’t looking particularly attractive, either.

“All the commodities are depressed right now,” Hagood said. “Every farmer’s situation is gonna be different. On a case-by-case situation they’re gonna have to determine whether they grow it.”

If the contracted price is too low to grow guar as a primary crop, Hagood suggested experimenting with it as a Plan B catch crop. A main reason for farmers to drop those late-season seeds is if a first crop suffers weather damage, and a consideration at that point is normally insurance deadlines. But with guar, the plus side to no insurance means being able to plant as late as Mother Nature will allow.

Calvin Trostle, an agronomist for Texas A&M AgriLife, recommends planting guar by July 1. In fields with weed troubles, he doesn’t recommend it at all.

“If a farmer has weed issues, guar may not be the best option,” he said.

Like the farmers he advises, Trostle likes guar for its drought tolerance. It also thrives in high temperatures, he added, which is easier to understand if you visit its native India.

“The area that it evolved in — Northwest India — gets very hot in the summer. It makes West Texas look pretty mild,” he said.

 

This article was written by Josie Musico from Lubbock Avalanche-Journal, Texas and was legally licensed through the NewsCred publisher network.

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