Chilli prices are likely to rally higher due to a sharp reduction in stocks and estimates of lower production.
Chilli prices are likely to rally higher due to a sharp reduction in stocks and estimates of lower production. Drought in the major chilli producing areas of Maharashtra, Karnataka and Andhra Pradesh is likely to hit the standing crop badly, traders said. India is the leading producer of chilli, contributing close to 45% to the global output, with an annual production of 12-14 lakh tonne.
“Production could be lower by two lakh tonne and the stocks in the refrigerated warehouses are in the range of 3-4 lakh tonne as against the normal of 25 lakh tonne. The market prices could slowly go above Rs200 per kg in the coming months,” veteran chilli trader Peraiah Ravipati from Bellary told FE. “The reservoirs in the three states are not in a capacity to release water for irrigation. Chilli crops need irrigation for longer duration. The excess rains in eastern Andhra are not helping the situation,” he added. In India, 40 % of chilli crop is monsoon dependent and fluctuates according to the availability of ground water. Chilli crop has to be irrigated and protected till March.
“The dry weather condition may lead to a sharp drop in crop yields. Chilli crop in Andhra Pradesh are dependent on canal water for irrigation, but with the sharp fall in reservoir levels, the government is in no position to release the water,” Vishida Vijayakumar of Geofin Comtrade said.
The price of chilli normally slumps during January to March due to heavy arrivals and thereafter surges during April-May due to domestic demand and slow down in arrivals. Chilli spot price at the NCDEX counter on Friday showed R12,350 per quintal for Guntur market.
Vishida estimates the market to rally high due to a sharp drop in crop yields and expectation of a rise in chilli exports. “The significant rise in exports seen in the past is mainly because of bad crop in China. If the crop in China is poor this year as well, India stands to benefit as the importers from China may increase purchase from India,” she added.
India’s chilli exports volume has increased 12-14 % annually to hit a record 3,47,000 tonnes in 2014-15, from 2,04,000 tonnes five years ago.