Mentha falls 12% on profit booking

Spot mentha oil prices on the National Commodity & Derivatives Exchange Ltd(NCDEX) have declined by about 12 per cent during the month so far to Rs 606.45 per kg from Rs 686.55 per kg due to profit booking from speculative traders.

Prices have declined by 20 per cent in comparison with Rs 751.25 per kg that was being quoted in the first week of January.

Mentha oil started losing its sheen with the nearing of the settlement deadline for the February contract, finally closing at a loss of more than 20 per cent at Rs 534.30 in February and 40 per cent decline since January 1. The February contract was quoted at Rs 876.3 per kg on January 2 and at Rs 693.10 per kg on February 1.

Mentha oil on the Multi Commodity Exchange of India Ltd (MCX) also declined 20 per cent in February at Rs 630.60 per kg. The February contract fell 30 per cent in comparison with Rs 893 per kg quoted on January 4. The MCX trades about 75 per cent of the total volume on mentha futures in the country.

Despite weakening sentiments, mentha oil saw a golden run in January with prices going as high as Rs 792 per kg. Although it failed to break the resistance of Rs 800 per kg which optimistic traders were expecting, traders remained keen on booking fresh orders.

"Mentha oil has been witnessing unusual volatility in spot as well as futures trading in the commodity exchanges," a Rampur-based trader said.

The MCX has increased margins by 5 per cent in order to control the volatility. Effective from Monday, an additional margin of 5 per cent has been levied on the members having net short open positions in their own account as well as their clients' account in February, March and April 2006 contracts and subsequent contracts on mentha oil, the circular issued by the exchange said. This has taken margins on contracts up to 18 per cent from the earlier 13 per cent.

The margin will be calculated at the end of trading on Monday on the closing open position of the members, and will be blocked from the deposits available with the exchange. Such reduced deposits will be available to members for trading on the next day, the circular said.

"The wide volatility is due to two factors. One, the fire that broke out at Swati Menthol, a Rampur factory with 500 tonne processing capacity, and two the closing of settlement period on NCDEX which expects delivery in huge quantities," said Anjani Sinha of MCX.

Presently, the February contract has an open interest of 37.78 lakh kg while March and April contracts have 18.13 lakh kg and 10.37 lakh kg respectively. As a trader said, the March and April contracts will show a downtrend from February end.

India produces about 22,000 tonne of mentha oil in natural and artificial forms. It exports about 3,000 tonne to Argentina, Brazil, France, Germany, Japan, the UK and the US.

Uttar Pradesh, accounting for about 95 per cent of the total output, is the largest producer and exporter of mentha oil in the world.

Mentha arvensis, with 1,25,000 hectare area under cultivation, is grown in the semi-temperate regions in the foothills of the Himalayas in Punjab, Haryana, Himachal Pradesh, Uttar Pradesh and Bihar.