Output may dent mentha oil futures

Record output in the current season, lack of domestic and export demand, and high stock levels in exchange-accredited warehouses are pointing towards a 8-10 per cent fall in prices of mentha oil futures, analysts and traders said.

"We expect MCX November mentha oil to trade around Rs 450 per 1 kg before its expiry," said an analyst at a Delhi-based brokerage.

According to official estimates, the total mentha oil output is pegged at 32,000-35,000 tonnes in 2007, up nearly 35 per cent from the previous year, the analyst said.

However, trader estimates range between 35,000 tonnes and 38,000 tonnes, he said. Chandausi, Barabanki, Sambhal, and Rampur are the key mentha oil growing areas.

"With carryover stock of 5,000 tonnes from the previous year, the total availability in the current year will be in the range of 42,000-43,000 tonnes," said Dharmendra Kumar of Shri Gopalji Jitenkumar & Co, a Chandausi-based mentha oil supplier.

The domestic and export requirement may not exceed 20,000-22,000 tonnes in the current year, said Kumar, who is also a member of MCX.

This leaves a surplus of around 20,000 tonnes for the next season, he added. Due to higher realisation of over Rs 600 per 1 kg in the previous year, farmers are still holding a substantial stock to sell around the Diwali festival and use the sale proceeds to meet their festival expenses. Also, farmers require funds for sowing operations of potato and other rabi crops in October-November.

Hence, good supply is expected in the spot market over the next couple of weeks. According to a trader, arrivals in major spot markets have already risen to 700-800 drums.