The Hindu Business Line : Mentha oil futures turn bullish

Despite a long-term bearish sentiment, futures were up due to speculative buying. Speculators, who were active in the counter on NCDEX and MCX, booked their profits in the last three days of the week.

Better Price

Markets estimate a bumper production of 26,000 tonnes this year, while farmers and traders are holding a carryover stock of 15,000 tonnes.

The total consumption per annum in India – including exports – is about 18,000-20,000 tonnes. Having sold mentha oil at Rs 600 per kg in May at Chandausi spot markets, farmers find it better to hold back their stocks and realise better price than selling them at the current level of Rs 554 per kg.

The prices have dropped to Rs 492 per kg mid-July and have ever since improved to the present level due to tightening of supply by the farmers.

Arrivals in major mandis like Sambhal and Barabanki and Chandausi have slowed down this week to 600 to 700 drums against the normal of 1,200 drums last week. Heavy rain in Uttar Pradesh has created logistics problem of moving in the produce to the markets.

Slow arrivals

According to informed sources, arrivals have never been so low during the peak season. With kharif sowing coming to an end in Uttar Pradesh, farmers are holding back their stock, as they don’t need urgent cash, said an analyst. Mentha oil can be stored up to a year without deterioration of quality. “The artificial tightening of supply coupled with expected rise in demand from pharma and tobacco companies is helping the short term bullish trend of mentha oil,” said a trader.

Mentha oil for August delivery on NCDEX has increased steadily from Rs 502 per kg on July 31 to Rs 540 on August 7. However, in the later half of last week it has corrected to Rs 529 on profit booking.

Heavy Rain

The September delivery, which has risen from Rs 510 per kg on August 1 to Rs 551 on August 7, has also dropped down to Rs 540 per kg.

Reports of 4 per cent crop damage in Barabanki, UP due to heavy rain was stocking up prices in the futures market. “We expect futures prices to trade on bullish note in the short term due to short-supply coupled with good demand,” said Mr Harish Galipalli, head of research, Karvy Commodities.

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