Mentha oil prices rise 40% on speculative buying

Mentha oil prices surged 40 per cent in the physical market last month from Rs 510 per kg on November 26 to Rs 715-720 per kg on December 26, on the back of speculative buying from a Delhi-based exporter.

On National Commodity & Derivatives Exchange Ltd (NCDEX) futures for February delivery were quoted at Rs 818.5 on December 24, compared with Rs 461.5 per cent on October 10, a gain of about 80 per cent in just two months.

Mentha oil prices have gained more than 40 per cent compared with the December 26 level of Rs 571 per kg on the NCDEX too.

Surprisingly, mentha oil for February delivery on Multi Commodity Exchange (MCX) "� where about 75 per cent futures take place "� surged to Rs 859 on December 24 from Rs 591.40 from December 1, a gain of more than 40 per cent.

Traders are concerned about rising futures prices for the month where the guaranteed profit is more than Rs 100 per kg, and have started infusing funds in circular trading and physical vis-a-vis futures arbitrage.

"I have started accumulating all funds to invest in mentha oil by buying in spot markets and selling into futures where realisation is more than that in any commodities today," a trader said.

"This is something unusual where backwardation is more than 10 per cent and it draws the immediate attention of the commodities market regulator "� Forward Market Commission "� on the activities of exchanges on which menth oil prices are traded," another trader said.

"Mentha oil prices have witnessed such a dramatic surge after five year's rangebound movement which is not based on fundamentals," NCDEX sources said.

MCX trades about 75 per cent of mentha oil futures in India which has seen mounting volume and open interest from Rs 264.66 lakh and 15.48 thousand on June 30th to Rs 15940.15 lacs and 1541.16 lacs on Decemeber 24 respectively.

"The market size is just Rs 600 crore and rarely sees price fluctuations but the introduction of 'Byaz Badla' (difference of spot and futures which opens room for manipulation) helped a lot for current arbitrage in spot and futures together," sources added.

"The trade is purely based on fundamentals as future prices are moving in tandem with spot prices. On MCX volume and open interest are moving hand in hand," MCX sources said.

In the spot market mentha oil was traded at Rs 460 on August 29, which slipped to Rs 422 on September 26 but started surging again from Rs 438 on October 26 to Rs 510 on November 26 and then Rs 715-720 on December 26.

India produces about 22,000 tonne of mentha oil in natural as well as artificial form and exports about 3,000 tonne to Argentina, Brazil, France, Germany, Japan, UK, USA.

Uttar Pradesh "� produces about 95 per cent in India "� is the largest producer and exporter of mentha oil in the world.

Mentha arvensis is cultivated in India in the semi- temperate regions in the foothills of Himalayas in Punjab, Haryana, Himachal Pradesh, Uttar Pradesh and Bihar.

The all-India area under mentha in the country is estimated at about 1,25,000 hectares.

ON THE BOIL
February delivery on Multi Commodity Exchange (MCX) "� where about 75 per cent futures trading of mentha oil take place "� surged to Rs 859 on December 24 from Rs 591.40 from December 1, a gain of more than 40%

Introduction of 'Byaz Badla' (difference of spot and futures which opens room for manipulation) helped a lot for current arbitrage

MCX has seen mounting volume and open interest from Rs 264.66 lakh and 15.48 thousand on June 30 to Rs 15,940.15 lacs and 1541.16 lacs on Decemeber 24