Chilli may firm up on low output

The chilli market is likely to rule firm on the back of less crop size this season. The commodity which witnessed damage due to untimely rainfall in the major producing regions of Karnataka and Andhra Pradesh may see an overall decline of around 20-25 per cent in output.

According to trading sources, Karnataka saw only 40 per cent of the last year’s crop where as Madhya Pradesh reported a decline in production at 1.8-2 million bags (each of 40 kg) against last year’s 2.8 million bags. Similarly, Andhra Pradesh could see production dipping by around 15 per cent.

“There is hardly any crop from Maharashtra and Karnataka. It is going to have its impact on chilli prices in Andhra Pradesh where the arrival will pick momentum in the next fortnight,” said Ashok Dattani, a Mumbai-based chilli trader. The last few months have seen a range-bound movement in chilli prices in the futures as well as in the spot markets.

Faiyaz Hudani, research analyst at Kotak Commodities, said, “Futures are trading at discounted rates compared to firm spot prices. The last two sessions of firm spot trading in chilli is signalling the fact that the futures market is trying to cover up the disparity. I see the market firming up to the level of Rs 4,800-5,000 a quintal.” In the physical market, prices are to the tune of Rs 5,400 a quintal.

The domestic demand, said analysts and traders, is very good. However, at the exports front, they said that demand from importing countries was not satisfactory. According to Mehul Agrawal, research analyst at Sharekhan Commodities, “In the local market, around 40,000 bags are being sold off for consumption. Demand from Bangladesh and Srilanka has started trickling down. This will firm up the market.”

In the previous season, the country produced around 23 million bags of chilli. Crop from Andhra Pradesh is of the best quality and most of the exports take place from the Guntur market in the state. The crop from Madhya Pradesh hit the market in September-October where as Karnataka’s chilli arrived in the market during November-December. “Andhra is the major supplier. Though arrival has begun, the LCA-334 quality will take around ten more days,” said Dattani.