Narrow commodities, including mentha oil and barley, have suddenly become favourites of traders at the derivative exchanges, attracting huge participation in the past few months, thereby, pushing the price in upward circuit. But, unlike guar seed and guar gum contracts, industry stakeholders deny any speculative trading in these contracts.
Used primarily in derivative form as menthol, mentha oil prices almost doubled in the past six months, while barley prices rose 17 per cent during the same period. Both commodities are produced in very few states for domestic use.
The consistent appreciation in prices is significant as the commodity market regulator, the Forward Markets Commission (FMC), recently unearthed massive irregularities in similar narrow commodities — guar seed and gum. Taking serious note of the irregularities, like margin funding, FMC recently suspended three Rajasthan-based traders for a period of 6-12 months.
“Prices of mentha oil and barley are driven purely by fundamentals. Hence, we do not see any action of investigation of traders’ account in case of these commodities,” said an FMC official.
“FMC used all its powers to penalise the culprit in case of guar. But, the prices continued to rise. This indicates the commodity had supportive fundamentals, too,” he added.
Despite regulatory actions against some Rajasthan-based leading traders, guar seed and gum prices for near-month delivery on the National Commodity and Derivatives Exchange (NCDEX) set a new record at Rs 18,096 a quintal and Rs 58,700 a quintal, respectively. These commodities have surged over 300 per cent in the past six months.
According to Ajay Kedia, an analyst with Kedia Commodity, mentha oil is trading firm and eyeing the Rs 2,000 a kg level soon due to strong stockist demand against small arrivals in major mandies. The commodity has gained over 44 per cent so far this year to quote at Rs 1,906.9 a kg on Monday at the Multi Commodity Exchange (MCX).
Strong demand from international markets and the domestic pharmaceutical industry along with waning supplies in major mandies added sharp gains in spot market, which is currently reflecting in mentha futures as well. The total arrivals are currently estimated at around 200 drums, down 50 drums from last week.
“Mentha production in 2011 was earlier estimated at 42,000 tonnes and later revised to 36,000 tonnes in October last year, as against the output of 28,000 tonnes in the previous year. In the last few days, prices of mentha have witnessed a sharp rise due to hoarding by local stockists anticipating further rise in prices on account of limited supplies during March-June. Sowing of the crop has commenced and fresh arrivals will only start from July,” said Naveen Mathur, associate director, Angel Broking.
| ON A HIGH NOTE | |||||
| Price (Rs/qtl) | Open Interest (In tonnes) | ||||
| Sep 1, ‘11 | Feb 25, ‘12 | % chg | Sep 1, ‘11 | Feb 25, ‘12 | |
| Guar seed (Jodhpur) | 4,339.00 | 17,364 | 300.18 | 364,530 | 28,820 |
| Guar gum (Jodhpur) | 14,021.00 | 55,340 | 294.69 | 67,550 | 5,585 |
| MCX mentha oil (Rs/kg) | 1,150.00 | 1,826 | 58.78 | 3,282,120 | 2,410,200 |
| Barley (Jaipur) | 1,178.60 | 1,378 | 16.92 | 6,360 | 1,580 |
| Pepper | 33,367.00 | 36,230 | 8.58 | 11,747 | 7,579 |
| Note: Prices are of near-month future on NCDEX & MCX, MCX mentha oil open interest is in kg Compiled by BS Research Bureau | |||||
India is the world’s largest producer and exporter of mentha oil, widely used as a flavouring agent in food products, including confectionery. Export of mint products, including menthol, menthol crystals and mint oils in the past three years was 17,000-20,000 tonnes, valued at Rs 1,200-1,700 crore. Apart from India, other countries that produce this oil are China, Brazil and the US. There is growing export demand for mentha oil.
Although, the fresh estimate of the current season crop is yet to be assessed, Vibhu Ratan Dhara, an analyst with Bonanza Commodity Brokers, feels the output has been damaged severely due to a cold waves in February. Earlier, the output was estimated 150,000 tonnes higher this season at 1.5 million tonnes.
After a steep decline early this month, open interest in barley started rising and was at 1,580 tonnes on February 25, from a mere 320 tonnes on February 11. Earlier, in January this year, open interest in barley was over 6,000 tonnes.
Pepper has also witnessed huge surge in the last few days on favourable fundamentals.
According to a report, pepper production in India is expected to be down 10.4 per cent to 43,000 tonnes in 2012 from 48,000 tonnes in 2011. Average (February 2012) arrivals in the domestic market, till date, have declined to 6.95 tonnes, compared to 12.39 tonnes in the last month. On the other hand, average offtake in February improved to 36.97 tonnes, compared to 6.95 tonnes in January.
