Unrestrained cultivation is taking its toll on turmeric and chilli. Higher returns in the past few years had prompted farmers to produce more of the two crops at the expense of cereals, cotton and tapioca. Now, the situation has taken a turn for the worse as the farmers are left with plenty of stock and few takers.

?Turmeric prices started declining from September last year. In 2010, turmeric fetched R17,000 per quintal and it was on a par with gold. Last year, the area under turmeric cultivation increased nearly 30 % in the traditional areas. Apart from this, new turmeric cultivators came to the scene in states like Punjab. It?s expected that the last year?s stock and this year?s production account for nearly 1 crore bags (75 kg/bag),? said N Ajjan of Tamil Nadu Agricultural University, Coimbatore.

India?s domestic consumption and export demand account for 65-75 lakh bags. Consumption of the commodity has been steadily increasing due to increasing usage in the medicinal and cosmetic industries. India accounts for 78% of the global turmeric production. With the supply exceeding the domestic and export demand, it has resulted in selling pressure. Production during 2010-11 is estimated around 69 lakh bags.

In fact, the commodity cycle has come a full circle for turmeric. The prices are estimated to touch the bottom by May. Arrival of the new turmeric crop normally starts from mid-January. Trickles gain momentum from March and continues through June. According to Tamil Nadu Agricultural University (TNAU) data, during April 2009, turmeric was selling around R5, 200 per quintal. In April 2010, it increased to R12,500 and, during December 2010, it was trading in the range of R16,500-17,000. Currently, turmeric is priced around R3,300-3,400 per quintal and traders expect it to decline further. Once in every five years, turmeric prices touch the minimum and the maximum.

?The falling prices have led farmers to hold the crop as the increased labour and cultivation expenses cannot be covered by the prevailing prices. Similarly, the area under chilli cultivation in Karnataka has increased by 10-20% and prices are sliding,? said Gracey C Pailey of the University of Agricultural Sciences, GKVK.

?Area under chilli farming has increased by 40% in South India at the cost of cereals and cotton. Farmers are in deep trouble, as they cannot sell at the current market prices as they will incur loss. They are not in a position to hold as the cold storages are full,? Peraiah Ravipati, a chilli farmer from Bellary told FE. Production cost of chilli comes to R45 per kg and storage cost R3-4 per kg for a month.

Chilli exports from India during the past three years were higher than the average, mainly due to shortage in China. Domestic prices moved up sharply as exports increased. Neighbouring countries like Bangladesh and Pakistan consumed huge quantities of Indian chilli in the absence of Chinese competition. India is the leading producer of chilli, contributing close to 43% of the world production, followed by China (8.6%) and Peru (5.6%). Chilli production is expected to be higher this year and the estimates vary between 12 lakh tonne and 13 lakh tonne against an estimated 8-lakh tonne last year. Last year, farmers received R80-90 per kg and, compared to the last year, red chilli prices have decreased this year, said N Ajjan.

?Exports are price sensitive. They have a 10-15% share in the total production. When the prices go up, buyers keep the inventory to the minimum and store when the market declines. Domestic consumption is strong and robust, but it is price inelastic,? said Ravipati.

Consumption of chilli is increasing substantially with the branded powder sales growing at a compounded annual growth rate of 11%, while the spices mix category is growing at a CAGR of 7%, according to a spices board report on the commodity.

Ravipati feels that next year, farmers would switch to cotton from chilli. ?Cotton prices are more stable than chilli. Farmers are likely to shift to cotton or cereals due to lower returns from chilli,? he added. Domestic and Export Market Intelligence Cell (DEMIC) in Tamil Nadu Agricultural University has analysed the situation and suggested that to avoid such a drastic price decline in the coming season, turmeric farmers must decrease the area under cultivation by at least 50%.

Expertspeak

N Ajjan

Tamil Nadu Agricultural University, Coimbatore

Last year, area under turmeric cultivation increased nearly 30% in the traditional areas. Apart from this, new turmeric cultivators came to the scene in Punjab. It is expected that the last year?s stock and this year?s production account for nearly 1 crore bags (75 kg/bag).

Gracey C Pailey

University of Agricultural Sciences, Bangalore

The falling prices have led farmers to hold turmeric as the increased labour and cultivation expenses cannot be covered by the prevailing prices. Similarly, the area under chilli cultivation in Karnataka has increased by 10-20% and the prices are sliding.

Peraiah Ravipati

Chilli farmer from Bellary

The area under chilli farming has increased by 40% in South India at the cost of cereals and cotton. Farmers are in deep trouble, as they cannot sell at the current market prices, as they will incur loss. They are not in a position to hold as the cold storages are full.

Statfacts

chilling facts

* India?s domestic consumption and export demand requires 65-75 lakh bags of turmeric. Current production is estimated around 82 lakh bags and the total stocks around 1 crore bags (1bag-75 kg)

* During December 2010, turmeric was trading in the range of R16,500-17,000 per quintal. Currently, turmeric is priced around R3,300- 3,400 per quintal

* Chilli production is expected to be higher this year at 12-13 lakh tonne against an estimated 8 lakh tonne last year

* Last year, farmers received R80-90 per kg for chilli and, currently, it is trading between 45-48 per kg

* India is the leading producer of chilli, contributing close to 43% of the world production, followed by China (8.6%) and Peru (5.6%).