Chilli prices slump on low demand, exports

Written by RajeshRavi | Kochi | Updated: Oct 20 2012, 08:31am hrs
Chilli prices are looking weak due to good carryover stocks and improvement in the southwest monsoon in the second half. India is the leading producer of chilli, contributing close to 45 % of the global supply with an annual production of 13-14 lakh tonne.

Chilli is facing an overall weak market due to lower exports, good stocks and sluggish domestic demand, Faiyaz Hudani at Kotak Commodity Services said.

Production of chilli is good in Bangladesh and Pakistan and exports to these countries are lower, he said. Chinese production is also on the higher side and giving competition in the global market, he added. Export of chilli is a key factor in pricing of the commodity. Higher exports always translate into higher domestic prices due to the lesser availability of the commodity. During the last FY, chilli exports stood at 2,41,000 tonne of exports worth R2,144.08 crore. Recovery of monsoon during the month of August has led to a correction despite the fact that farmed area is on the lower side. Traders expect production to be higher than the initial estimate, Vedika Narvekar of Angel Commodities said.

Spot price at the NCDEX counter quoted R5158 per quintal on Friday evening. Traders expect production to be lower by 25 % due to climate and farmers moving to other crops. But the stocks are in plenty at the cold storages and that is capping an upward rally, she said.

Area under chilli in Andhra Pradesh is lower by 30%. But Madhya Pradesh is estimated to show an increase in production due to the benefits of higher yielding variety, she added. Andhra Pradesh accounts for over 7.5 lakh tonne of the Indian production.

Kotak reports that red chilli production in Andhra Pradesh may decrease by 25-30 % on lower rains and farmers switching to cotton. Carryover stocks in Andhra Pradesh are estimated around 75 lakh bags by Kotak with more than 40 lakh bags at Guntur cold storage. Traders estimate the current chili supply to be more than 30% when compared to the demand .