As we move towards the end of June nearly 45 % of menthol has been distilled on the fields.
This is certainly a lot slower than normal years.
As has been reported before the crop was planted late this year and this resulted in most of the crop still standing on the fields today.(Noramlly it should have been at the end of season at this time of year).
The markets dynamics are as follows:
- It is true that India will get a crop of atleast 25% more than last year.This should result in a supply of about 28000 mt of menthol crystals.
Conversely ,THERE IS ZERO CARRY OVER FROM LAST YEAR(ABOUT 15 -20%) or about 5-6000 mt of menthol.Thus the surplus is only about 2000 mt.
- The farmers sold every ounce of their stock from old material at very high prices,and are thus loathe to bring the oil to market at lower prices today.The oil coming out from fields is being held by the farmers currently,and they will not bring it out at low price.This is manifested in the arrivals in the terminal markets which should have been around 800-1000 drums and are currently only about 500-600 drums.
- The 50% crop standing is now at the mercy of the rains.If the rains are continous,we may have a crop damage and delays.
- The new enforcement of Mandi Tax(Purchase Tax) by the State of Uttar Pradesh,has only restricted the movement of oil ,as a lot of small traders are not registered with the authorities.This will mean that the oil will only be transported by the larger traders,who will add their margin and also have a larger money power to hold material
- Because the crop is larger,and there is no carryover,the conversion cost being charged by the field distillation units is double that oi llast year(up from Indian Rupees 50/kilo to Indian Rupes 100 /kilo of raw material).The farmer would like to get his crop distilled quickly ,and there is only a limited number of field distilaltion units
- As has been said several times earlier Europe and USA are totally void of material ,and there is a frenzy to cover short term needs,adding to the northward pressure on menthol prices.
- TIll now the stockists and speculators have not entered the fray,biding their time and understanding the crop size.If , inspite of their absence there is this firm undertone , the market can be taken to dizzing heights when speculation starts on the commodity exchange.
- On the flip side ,it can be said that the current prevailing prices of menthol crystals,are only due to a short term shortage of menthol in the markets and the delayed crop.
The prices will settle down to more comfortable levels in the next two weeks, as the first batches of menthol from the new crop hit the market.
- THE CAUTION HERE IS THAT BUYERS WOULD BE ADVISED NOT TO TAKE THE FALL IN PRICES AS A FREE FALL,AS IN OUR ESTIMATES THIS FALL WILL BE SHORT LIVED AND IT WILL RANGE BOUND
