Chilli hits Rs 6000/quintal on declining inventories

Declining chilli stocks in the warehouses of National Commodity & Derivatives Exchange (Ncdex) have pushed the futures prices up. On Monday, the December contracts notched up close to Rs 6,000 a quintal mark "" making a comeback after a gap of more than a month.

NCDEX today fixed the settlement price for the November contract at Rs.6588.80, much higher then prevailing average price during the month. Sudden spurt in chilli futures since last few days caught market players unaware.

Meanwhile, FMC has put on hold the launch of January contract till the quality issues are resolved. December contracts closed at Rs 5,920 a quintal, up Rs 27 against the last week's close of Rs 5,893. During the day, it breached the Rs 6,000 mark, touching Rs 6,053.

Last week alone, the prices had surged by more than 11 per cent.

The current stock of chillis in the warehouses is 2,465 tonne and these are of good quality.

A month ago, the stocks were hovering around 7,000 tonne, of which around 5,000 tonne of inferior quality were cleared. Ncdex has been clearing off inferior quality chillis for the last three weeks. Sources said the present stock is sufficient enough to meet the market requirement.

According to traders, disposing the inferior quality of the warehouses of the exchange has helped support the falling prices, which had dropped below Rs 5,000.

The cleared stocks, according to market sources, are being passed on to the physical market. They added that buyers are expected to sell them in the physical markets.

This initiative is lessening the gap between the spot and the futures prices of chilli which, otherwise, was going through a backwardation phase for quite sometime now.

Meanwhile, stocks in the Guntur market are around 10 lakh bags (each bag of 40 kg) with a large chunk of inferior quality. Traders said buyers from Bangladesh and Sri Lanka are still in the market, but there is a dip in buying.

As far as the new crop estimation goes, the scenario seems to be optimistic. The year 2005-06 had seen a drop of almost 50 per cent in production against 2.6 crore bags in 2004-05.

Though the new crop will start arriving by mid-January (The crop in Madhya Pradesh is expected by December), sources said this year's crop estimates are on the higher side.

Market sources are estimating 130 lakh bags from Andhra Pradesh, 40 lakh bags from Karnataka, 6 lakh bags from Maharashtra and 17 lakh bags from Madhya Pradesh.

This alone will put the output close to 2 crore bags.