Dealing Room Check: Bull run in mentha oil futures continues





The futures contract of mentha oil was the top gainer among contracts traded on the Multi Commodity Exchange of India during the week ended July 28. Heavy rains across mentha producing areas of Uttar Pradesh disrupted the smooth supply of the produce to the trading centres. Besides, there was an increasing demand for the produce from stockists as well as end-users, which helped prices move up. The most active August month contract of mentha oil futures rallied to a high of ₹1,077 per kg from the weekly low of ₹995.70 per kg. Towards the end of the week, though the contract lost some of its gains, it still ended the week on a positive note.

For the current season, all India mentha oil production is estimated in the 35,000-38,000 tonnes range against last year’s production of 30,000 tonnes. Usage of high-yielding variety for cultivation has helped production go up. The area under mentha cultivation remained same as last year.

There was some shortage in supply in the spot market as farmers held back stock, given the price rally.

Outlook

For the week ahead, the bull run in the mentha oil futures contract is expected to remain intact following strong fundamentals. However, during the early part of the week, the contract may see some correction as prices have rallied by 6.85 per cent this week. The correction can be used for initiating fresh long positions in the contract.

The writer is Head, Commodity Research, Karvy Comtrade

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