Mentha futures on the boil, rises 6%

Mentha oil futures touched the upper circuit of 6 per cent on the Multi Commodity exchange of India (MCX) on Monday.

The July, August, September and October contracts closed at Rs 527.60, Rs 537.40, Rs 539.00 and Rs 553.20 respectively. This sharp rise is mainly due to an uptrend in spot markets and strong overseas demand. Similar trends ware seen on the NCDEX as well.

This is the second instance mentha oil contracts touched the upper circuit in the last seven days. On the MCX, the medicinal oil had crossed the upper circuit of 4 per cent last week.

In the spot market, mentha oil has risen by about 18 per cent in the last one month which indicates that it is heading towards last year's mark of Rs 1,000.

If the current trend persists, mentha oil may touch Rs 600 within the month, Girish Gupta of Chandausi-based GK Proteins & Chemicals said.

He said the price rise can be attributed to three main factors - rising local demand, no carry over stocks and high speculative buying on futures exchanges.

Moreover, futures have worsened the situation as traders can no longer anticipate the market and hold or offload the position as per their situation.

"Knowing future market is not bad but that should ease the complexity of the market," he added.

Speculative fund buying by leading traders of the industry is being seen as the main price driver.

Mentha oil production is likely to cross 25,000 tonne in the current calendar year, compared with about 20,000 tonne last year, on account of bumper of a mentha crop and higher yield. Reportedly, mentha acreage was much higher this year in order to cash in on the high prices which had breached the psychological Rs 1,000 a kg barrier last year. According to industry sources, mentha acreage has increased over one-and-a-half times over last year.

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 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 an acre.

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.

Yield this year 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.