FMC levies 20% cash special margins in mentha oil to control price rise

Bans fresh positions in mentha oil Feb contract from today

Faced with widening gap between two contracts because of speculation, the Forward Markets Commission (FMC) has levied 20% special margin on mentha oil contract for delivery in February 2013.

The margin levied in the form of cash on long (buy) side is being levied with effect from February 25, 2013.

After this revision, margins applicable on mentha oil February 2013 contract would be as under:

• Higher of initial margin or margins calculated as per SPAN
• Additional margin of 5% (cash) on buy and sell side
•     Special margin of 20% (cash) on buy side in February 2013 contract only

There will not be any change in the margins applicable to all other contracts of mentha oil.

Apart from that, the FMC banned fresh positions in mentha oil February 2013 contract from Saturday i.e. February 23, 2013.

Mentha oil for delivery this month gained by 4% to settle at Rs 1,487 a kg on some short covering amid firm spot demand.

The surprise is the spread in the February and March futures that has closed as Rs -188.50 that is the highest level we have seen in last five years ahead of arrival season, according to Ajay Kedia, managing director of Kedia Commodity, a Mumbai-based broking firm.

Also, generally, it has been observed that the spot to future discount kept around 10%. But this time spot is stagnant at Rs 1,450 a kg level while February futures rose above the spot and closed with a gain of 4% on Friday.

Meanwhile, farmers are holding their stocks with the anticipation of higher prices in near future similar to last year when they earned handsome returns for their inventory, said Kedia.

According to the traders, the total area under mentha crop cultivation is expected to remain 20% higher at 2.10 lakh hectares this year against last year's level of 1.75 lakh ha.

Also, mentha oil output is estimated to be proportionately higher at around 65,000 tonne this year, when compared to 53,000 tonne last year.

Sowing for mentha crop is expected to be completed by the end of February. High stock levels had ensured a fall in rates for the commodity over last few days. On 19th February, total stock of mentha oil at MCX-monitored warehouses at Chandausi was 80,177 kg of which 78, 017 kg was physical stock.

At Barabanki, the total stock was 7,80,526 kg of which, physical stock accounted for 7,02,031 and demat stock was 78,495 kg.

With this action, prices are likely to cool down soon, said a trader.