MCX mentha oil futures pierce upper circuit

Uptrend in spot market, overseas demand seen as triggers.

Mentha oil futures on Multi Commodity Exchange (MCX), in early trade on Wednesday, crossed the upper circuit of 4 per cent on an uptrend in the spot market and strong overseas demand.

The July contract perked up to Rs 468 a kg, while the August contract surged to Rs 477 a kg "� finally closing at Rs 465.6 and Rs 475.8 respectively, each contract gaining about 3 per cent.

A similar gain was witnessed on Wednesday in the physical market too, where mentha oil jumped more than 4 per cent intra-day and about 7 per cent since Monday. In a highly volatile session, the commodity settled for the day at Rs 484 a kg in the spot market "� up from Rs 453 a kg on Monday.

MCX may consider levying a special margin if the trend continues for a few sessions more. "The price rise is mainly attributed to three factors "� no leftover from last year's stocks, rising local demand and high speculative buying on futures exchanges," said Girish Gupta of Chandausi-based GK Proteins & Chemicals.

Speculative fund buying by leading traders of the industry is being seen to be the main driver of the spurt in prices.

Mentha oil output is likely to cross 25,000 tonne in the current calendar year, compared with about 20,000 tonne last year, on account of bumper (mentha) crop and higher yield.

Mentha was sown over a much larger area this year, as the prices had breached the psychological barrier of the Rs 1,000 a kg mark last year. Industry sourced said mentha had been sown over an area "� one-and-a-half times the last year's area.

The yield, too, is likely to be about 50 per cent higher this year, a National Commodity & Derivatives Exchange report said.

However, a section of traders is sceptical about higher yield this year. They say though the area under mentha cultivation is higher, yield may not be very high owing to unfavourable climatic conditions.

Higher temperatures since February and falling water tables in Sambhal, Rampur and Chandausi will affect crop yield this year, as mentha "� a water-dependent crop "� requires about 20 irritations during the crop cycle. The average yield is about 30-35 kg of oil a acre.

This year, the yield may dip below 30 kg a acre at some places, the report said. Mentha is primarily grown in Sambhal, Chandausi, Barabanki, Bedayun, Ram Nagar and Bareily "� all in Uttar Pradesh.

Mentha crop (mint leaves) is usually sown in February and harvested from mid-May. This year, oil extractors are expected to earn high profits, with extraction of about 125 per cent, on the anticipated shortage of rainfall.