Introduction

Mentha is an aromatic plant having pleasant odour which is also well known as Japanese Pudina.

Mentha oil is derived from Mentha Avernis leaves by steam distillation. Mentha oil and its constituents

are widely used in food, pharmaceutical and cosmetics industries. Menthol is used as raw material in

Toothpaste, Toothpowder, chewing tobacco and Pain balm. Presently India is the largest producer of

mentha oil in world contributing about 85% of total production, and rest is contributed by China

followed by Brazil and US.

Seasonality

In India Mentha is cultivated in semi- temperate regions in the foothills of Himalayas, mostly in

Punjab, Himachal Pradesh, Uttar Pradesh and Bihar. The ideal climate for growing mint requires Dry

hot summers, long days of sunshine, temperature around 80 degree, 125-150 cm rainfall in the

growing period. It is generally sown in the month of December and harvested in March. Mentha oil

arrives in market in April month. Once Mentha is planted, it can be cut thrice.

Jan Feb Mar Apr May June

Sowing Growth Stage Harvesting

Processing

Mentha oil is prepared by steam distillation and filtration of dried leaves. A golden yellow volatile oil is

obtained by this process. When the crop reaches the flowering stage maximum oil is extracted from

leaves and flowering tips. About 50% of menthol can be separated out in crystalline form on cooling

the oil. The remaining 20% (dementholised) oil is used as peppermint oil and the rest 20% for other

products.

Crude Peppermint Oil

Terpenes Deterpenated Oil

Isolated Components

Flakes DMO

Crystals Rectified DMO

(Deterpenation)

(Rectification)

The natural oil yields on an average 40-50% menthol and 50-60% dementholised oil, which can be

used both in confectionery and medicine in place of imported peppermint oil. Commercially mentha oil

is mostly used for industrial purposes like

Ø Confectionary

Ø Mouth Fresheners

Ø Analgesic Balms

Ø Cough drops

Ø As perfumes

Ø Medicated tooth pastes

Ø Chewing gums & Candies

Ø Tobacco Industry

Tobacco industry constitutes about 40% of the total mentha oil consumption followed by pharmacy

and confectionary industry.

Supply Chain

Farmer

Private Distillers

Field Level Purchase agents

Large Trader

Stockists

Other Exporters

Global scenario

Major producers of mentha oil in the world are India, China, Brazil, US and Japan. India exports

different types of mentha oil to various countries which includes Argentina, Brazil, France, Germany,

Japan, UK, USA, etc. In 2000, Out of total mentha oil produced, 75% was M. arvensis (mainly to

produce menthol), 18% was peppermint and 7% was spearmint. Out of total M. arvensis oil

produced: India contributed 73%, China 18% and others 9%. Similarly in total peppermint oil

produced: US contributed 87%, India 7.5% and others 5.5%, In spearmint oil: US contributed 70%,

India 20% and China 10%. US is principle source of peppermint and spearmint and had 20% share of

global mentha oil production.

About 30-40% of total mentha production is consumed by India, followed by China. Rest about 40%

is consumed by US and European countries.

Annual world consumption of menthol is 9600 MT. India is the largest consumer of menthol with

annual consumption of about 3100 MT in 2003. Other menthol consuming countries are:

• India (3100 MT)

• China (2000 MT)

• European Union (1900 MT)

• USA (1800 MT)

Share of diff. countries in menthol consumption in 2003

32%

21%

20%

19%8%

India China Europe USA Others

Production of Mentha in China & India (in MT)

02000400060008000

10000120001400016000

1970

1980

1985

1987

1990

1993

1995

1996

1997

1998

1999

2000

2001

2002

India China

Since 1996 onwards India is gaining importance as the main source of mentha oil to the world.

India has displaced China, Brazil and Japan to become the principal source of Mentha Oil. In China

acreage is reducing as farmers are shifting to other crops. Superior product price competitiveness,

lower cost of production and attractive remuneration had attracted Indian farmers to shift to

mentha cultivation.

World Menthol-Production&Consumption

0

2000

4000

60008000

10000

12000

14000

1993

1995

1997

1999

2001

2002

2003

2004

Menthol production Menthol consumption

During last five year mentha oil consumption had shown slight increment if compared to the

production figures. Huge production in 1997 had resulted in huge inventories thereafter which

pressurize the prices thus making mentha less attractive than before. It resulted in almost constant

acreage till 2004.

Domestic scenario

India is the world's largest producers & exporter of mentha oil and exports nearly 80% of its

produce to Argentina, Brazil, China, UK, and France, Germany, Japan, and US. Area under mentha

in the country is estimated at about 1, 25,000 hectares. Total mentha oil output in 2005 is pegged

at about 18,000-20,000 MT. In 2004-05, total mentha oil production rose to 15770 MT. Uttar

Pradesh is having lion share in both area and production. Almost 80-90% of total area under

cultivation is in UP followed by Bihar, Punjab, Haryana and Himachal Pradesh.

Share of diff. states in Area

90%

5% 2% 2% 1%

UP Bihar Punjab HP Others

India- Area & Production

1000

21000

41000

61000

81000

101000

121000

1995 1996 1997 1999 2001 2003 2004 2005

Area(Hec) Prod(Mt)

In 1997 the area under mentha cultivation rose considerably mainly in U.P. It went up to 40,000

hectares from 20,000 hectares in 1996 because some sugarcane farmers shifted to its cultivation in

view of closure of several mills and irregular payment of arrears by sugar mills. Even in 2005, the

area under mentha is reported to have gone up drastically because of higher price realization in

previous year.

Mentha Arvensis Oil has the major share with 14000 MT distantly followed by Mentha Peperata Oil

1500 MT, Mentha Sparmint Oil 250 MT and Mentha Citrata Oil 20 MT. Mentha Peperata is now a

thrust area for India. During past 8-10 years, Indian Mentha Piperita has gained tremendous

popularity in world market. But unfortunately, Indian could not able to reach at par with the American

varieties. Because of this, the buyers of Indian Mentha Piperita are using Indian Mentha Piperita oil as

a blend with American Mentha Piperita.

Major trading centers of mentha oil Major centers in India are: Ø Chandausi

Ø Badaun

Ø Sambhal

Ø Barabanki

Ø Rampur

Ø Bareilly

Ø Mumbai

Demand & Supply

According to trade estimates, mentha oil output is likely to cross 25,000 MT in the current calendar

year. As India’s total demand for menthol is around 4000-4500MT against total supply of 14000 MT

in 2004, India exported major part of its Mentha oil (7000MT) to another nations like US, UK,

France. At present India produces about 20,000 MT of mentha oil and exports most of its

production which earns it foreign exchange worth more than Rs. 100 crores annually.

India's Export of mentha oil

500

1,000

1,500

2,000

2,500

3,000

3,500

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-2k

2000

-01

2001

-02

10

30

50

70

90

110

130

150

Quantity, MT Value Rs. Crores

Price Trends

Mentha prices follow a cyclical trend every year following its seasonality. From November end prices

started rallying on the back of increased demand both in Domestic and International front. Winter

season in Northern Hemisphere also boost the industrial demand of mentha as it is mainly used as

cough drops and analgesic balms.

Mentha spot prices(Per Kg)

100

200

300

400

500

600

700

800

Aug-0

5Se

p-05

Oct-05

Nov-0

5Dec

-05Ja

n-06

Feb-0

6Mar-

06Ap

r-06

May-06

Jun-0

6Ju

l-06

Aug-0

6Se

p-06

Oct-06

Present Scenario

Mentha was sown over a considerably larger area this year, as prices were hovering around the

psychologically crucial Rs 1,000 per kilogram mark last year. Mentha had been sown over one-and-

a-half times the area sown last year and the production is also likely to be about 50% higher than

last year's 18,000 MT. Although the area under mentha cultivation is higher, yields may not be too

high due to unfavorable climatic conditions. Average yield is about 30-35 kilograms of oil per acre.

This year, the yield may dip below 30 kilograms per acre at some places. The cost of cultivation is

also up substantially as power availability was poor. As the oil can be stored and held for at least 20

years without any concerns about quality deterioration there is meager chances that prices will

come down much. Overall demand for mentha is expected to grow at the rate of around 5-6%.

Presently ample stock is reported in spot market. In exchange ware houses almost 2500 MT (1000

MT in NCDEX & 1500 MT in MCX) of stocks are lying. Farmers and stockists are not taking out their

produce in expectation that price will increase thus creating artificial demand in market. Demand is

also expected to increase from countries like China and US. Upcoming seasonal demand in winter

will also boost the prices for short term.

Taking into account all the above mentioned factors Mentha prices are expected

to go up till January. However this year it is expected that prices may not test

950 levels as previous year because of increased production along with high

carry over stocks. We expect Mentha to test 750 then 800 levels by December

end or January beginning.

Mentha oil December Contract Technical Outlook Mentha oil prices made a radical move in the last year from 432 till 933 levels and simultaneously

fell to the bottom too. After reaching the bottom market has again started picking up. Market is

moving in the up trend channel and expects prices to go further up in the long term. Market has

breached the trend line resistance and 23.6% retracement of (433-761 moves) at 682 levels and

expects to move towards initial target of 765 then 800 levels. Though prices are expected to go up

few trend channel supports can be seen at 640-660. The momentum indicators are also supporting

the prices to move up as the RSI (14) is at 0.64 and the MACD is making a positive cross over

which would push the prices to go up.

Recommendation: Buy on a small correction around 665-680 for a possible target of

766 then 800 levels for long term.

Daily MENTHAOIL DEC6 3/25/2005 - 12/11/2006 (BOM)

766.270.0%

682.7823.6%

631.1338.2%

589.3850.0%

547.6361.8%

412.48100.0%

Cndl, MENTHAOIL DEC6, 11/22/2006, 692.7, 709, 692.7, 699.8EMA, MENTHAOIL DEC6, 11/22/2006, 662.26EMA, MENTHAOIL DEC6, 11/22/2006, 656.14EMA, MENTHAOIL DEC6, 11/22/2006, 636.02

PriceINRKg

.##360

400

440

480

520

560

600

640

680

720

760

800

840

935.52

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecQ2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006

KARVY Comtrade Ltd is engaged in commodities broking business in India. For opening a commodities trading account, contact 91-40-23388708, 91-40-23312454 or any of the nearby Karvy branches. Mail us at commodity@karvy.com Disclaimer The report contains the opinions of the author, which are not to be construed as investment advices. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for the accuracy of the information presented herein or for the results of the positions taken based on the opinions expressed above. The above mentioned opinions are based on the information which are believed to be accurate and no assurance can be given for the accuracy of these information. There is risk of loss in trading in derivatives. The author, directors and other employees of Karvy and its affiliates cannot be held responsible for any losses in trading.