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Fresh crop seen boosting Guntur chilli mandi volumes

Crisil Marketwire  |  Guntur 

The current might have robbed the Guntur mandi of some of its otherwise frenetic level of activity, but come January and farmers will once again return to the market yard with a fresh crop of red chillies. The hordes of middlemen will then get even busier, striking bargains for clients in the absence of an auction system.
The low level of activity in Asia's biggest market yard at this time of the year is not surprising as it is the lean season for the red chilli market.
Daily arrivals throughout September at the Guntur mandi in Andhra Pradesh have dwindled to an average of 40,000-50,000 bags (of 40-45 kg each) from over 100,000 bags in the peak season in January-April. A bumper crop of red chilli in and around Guntur and massive stocks in warehouses have pushed prices down by about 25 per cent from a year ago, traders said.
One of the popular varieties of red chilli, 334, currently trades in a range of Rs 1,700 to 2,300 per 100 kg, depending on the quality.
In and around Andhra Pradesh, red chillies are grown between September and January.
Arrivals stream into the mandi from the middle of January and the marketing season for the fresh crop is practically over by the end of April.
Chilli Ambience: As soon as one enters the mandi, a violent bout of sneezing causes breathlessness for a while, even for the visitor who isn't overwhelmed by the sight of a sea of undulating red mounds.Particles from tonne of red chilli lying around could unnerve even the strong-willed. But that's a temporary phenomenon, and visitors get used to the environment, like traders and farmers have.
Economic fate of hundreds of thousands of chilli farmers is decided in the wee hours. The trade starts at around 5.30 in the morning and most of it is over in a few hours.Formed in 1969, the Guntur market yard is located 5 km from the heart of Guntur town, near Hyderabad.
Spread over a huge area of 50 acres, it has two national highways on either side""Guntur-Madras and Guntur-Nagarjunasagar.
Apart from farmers who are represented by the middlemen, some 480 commission agents and 320 buyers and exporters conduct their business here, and ratchet up an annual turnover of over Rs 6 billion.
Unlike many other mandis, the one at Guntur does not work on auction basis.
"Too many varieties and too much quantity come to Guntur mandi for an auction process to be feasible," said M. Siva Ramaiah, Selection Grade Secretary who looks after the mandi.
One only has to see the varieties of chillies here to believe this statement. Some 35 varieties of chillies in all possible hues of red come to the Guntur mandi from 7 districts in and around Andhra Pradesh.
Equally fascinating are the names they bear: Phatki, Teja, Indo-5, Wonderheart, Sanam, Ankur, Roshni, Bedki and Madhubala are some of the lower grade varieties, whereas 334 are among the premium quality chillies.
As in many other crops, top quality chillies are used for exports. Others like Phatki and Teja could be too spicy for some people's taste while a few others are used just to add colour to the dish.
Trading System: Although there is no auction system for trade here, the mandi authorities do conduct a solitary auction in the morning to set the first price. This auction is for 334 variety and supposed to set the model price.
The absence of a proper auction system and price display has rendered the price discovery function somewhat opaque. It is the middlemen on two sides""buyers and sellers""who negotiate price and quality and help close the trades.
"This system has been working in Guntur for the last 40 years," said a local trader.
Commission agents facilitate trade by advancing money to the farmer at the beginning of the season, and also to the buyer by extending him credit. Although buyers are required to pay up in 13 days, delays are common. The authorities are now planning to impose penalty in the form of interest for delay in these payments.
Traders,however,point out the electronic weighing machines, used to weigh chilli bags, which stand as silent sentinels of modernity, to claim that the face and flavour of their commerce too, is changing.
Once the chilli crop is ready, not all of it goes to the market. A part of it goes to the cold storages for sale in lean months. In Guntur, there are 65 to 70 such cold storage units with a capacity to store 4.0-4.5 million bags.
The current arrivals in the mandi are from the cold storages, and known as A/C varieties.
Currently, because of the huge crop this year, the cold storages are full to the brim. And the owners of these are exploiting the situation by hiking the price. Some of them have hiked the rates from Rs 65 a bag last year to Rs150 a bag now.
A good amount of red chillies is converted into powder at a few small units. These units mostly operate on a commission basis. The changing economics of chilli cultivation has forced farmers not only to shift to other crops but also to change the cultivation practices. For instance, from the earlier 4 pickings, only two remain as labour becomes more expensive. Also the daily labour system has shifted to contract labour system.
Come January, and the downpour of red will be so heavy that even the inside roads will be paved with chilli bags, leaving little space to walk, said Naresh Sharma, an exporter.

First Published: Thu, September 22 2005. 00:00 IST