Mentha traders head for UP

Volumes on national commodity exchanges drop as marketmen opt for mandis.

Turnover in mentha oil contracts on the national commodity exchanges has shrunk sharply. Market sources said that volumes were continuously slipping as traders kept off the commodity.

The sources said that the volumes had declined as traders kept away from taking fresh positions, with the mentha harvest just beginning.

However, a section of the traders alleged that flourishing dabba (unofficial) trade in Uttar Pradesh was luring traders there, leading to a drop in transactions on the national exchanges.

The mentha oil turnover on the Multi Commodity Exchange (MCX) dipped by 57 per cent to Rs 846.11 crore in June from Rs 1,960.83 crore in April. Similarly, on the National Commodity and Derivatives Exchange (NCDEX), the turnover shrunk to less than a fourth to Rs 101.87 crore from Rs 417.27 crore during the period under review "" a straight cut of over 75 per cent.

Meanwhile, there are reports that traders are shifting to the local physical markets in Uttar Pradesh, with the unofficial trade appearing more lucrative.

Marketmen said that low volumes had led to an illiquid mentha oil market, huge causing losses to traders. With high volatility the market market had become uncertain over the last few months, they added.

"It could be a temporary shift. As they (traders) do not have to pay any penalty and margins in the spot physical mandis, the shift may be proving lucrative to them," said a trader.

According to the sources, the number of traders in mentha futures has come down to 100, with over 75 per cent of the traders moving out of the market.

Mentha oil has a shelf life of 6-7 years and traders can store it for long. "We can preserve the stock for long after the delivery. Sooner or later, the market would go up and we can then liquidated the stock," said a trader.

According to commodity analysts tracking mentha oil, the market is going through a bad phase, with volumes dipping to unexceptionally low levels. A section of traders went to the extent of saying that mentha oil futures would not see a rise in volumes again.

The turnover figures of July so far seem to be in line with what the marketmen believe. On the NCDEX, the July contract turnover (up to July 17) crashed to a meagre Rs 39 crore, whereas on it declined to Rs 243.66 crore on the MCX.

This year, the crop estimates are hovering over 30,000 tonnes, up 65 per cent from the last year's production of 20,000 tonnes.