Mentha bullish on supply constraints

The spot mentha market is on an uptrend following a supply squeeze, owing to floods in eastern Uttar Pradesh. Marketmen feel that reports of damage to the standing crop may further push up prices.

A few days ago, traders were expecting prices to drop below Rs 500 a kg to around Rs 480 a kg. However, reports of lower supply have changed the market sentiment to bullishness.

Girish Gupta, a Chandausi-based trader said, "Floods have put around 20-25 per cent of the crop at high risk. The spot market has reached Rs 525-530 a kg from Rs 508-512 a kg. We anticipate that the market will only go up now and reach Rs 600 a kg." So far, 70 per cent of the crop has been harvested. A mentha analyst at Angel Commodities subscribed to Gupta's view.

The daily arrival in the Uttar Pradesh markets, which till a few days ago was around 1,200 drums (each of 180 kg), has come down to 600 drums due to logistical problems arising from floods.

Meanwhile, the overseas demand for the commodity is rising even as the domestic demand is moderate. According to sources, two Mumbai-based mentha exporters have bagged orders of around 20,000 drums of mentha oil within a month. They added that the export demand was strong, especially from the traditional markets of China and the US.

The overall crop estimates, which were 32,000 tonnes for the current season, have fallen to about 30,000 tonnes. Traders said it was mainly due to less recovery of oil from the crop, which was around 5 per cent less than normal. Last year, the country produced 18,000 tonnes, with exports accounting for more than half of the output.