Rains, low demand leave chilli in the red

Poor offtake amid good arrivals has given the bears a firm grip on the chilli market. This sentiment is expected to continue for a longer period now.

Besides, with the sowing season nearing, prices may not see any major surge for another four to five months. The futures market is already showing signs of weakening trend in the commodity.

The Guntur market opened on Thursday, but saw palpable activities only on Monday. The market witnessed an overall arrival of around 60,000-65,000 bags (each of 40 kg) against 30,000-35,000 bags in the first two days after the market reopened. However, on Monday, only 35-40 per cent of the arrival was sold.

Out of the total reported arrival, around 40,000 bags were produced by the farmers and the rest came from cold storages. Marketmen said that around 8 lakh bags are still held by farmers, which however is not of good quality.

Produce from farmers fetched Rs 2,500-3,300 a quintal on Monday and that from cold storage (of better quality) were sold out in the range of Rs 4,000-4,500 a quintal.

"There is no demand from the export markets (Bangladesh, Sri Lanka). Local demand is equally poor and we do not see any uptrend in the overall market. Market will be engulfed in strong bearish sentiments once the June contract expires," said Ashok Dattani, a chilli trader.

Presently, stocks of chilli in the cold storages are around 80 lakh bags. Out of this, Guntur alone accounts for over 50 lakh bags. The country produced around 2.3 crore bags of chilli for 2006-07.

"June and July are very sluggish months in terms of demand for chilli and so is the effect on the rates. Unless any demand comes from export markets, rise in rates are unlikely. The market will only weaken further," said Nalini Rao, an analyst with Angel Commodities.

Dattani added, "The rates may stoop to as low as Rs 3,500 a quintal in the days to come." Sources said demand could come only in the month of Ramadan but they expressed doubts on the sustainability of the demand.

Meanwhile, reports suggest that sowing has begun in some parts of Karnataka. Market observers said as rains start, sowing will quickly follow in other states as well. Farmers in Madhya Pradesh, sources said, had better prices last time as the products came earlier. "It is expected that this time, acreage of chilli may increase from the state," they said. If it happens, chilli market may see a long continuous bearish trend.

Chilli futures market closed in red. On the National Commodity and Derivatives Exchange (Ncdex), the near-month contract fell to Rs 4,619 against the previous close of Rs 4,800 a quintal, down 3.77 per cent.

Similarly, the next three contracts (July, August and September) also slipped by over 2 per cent.

According to commodity analysts, the July contract has a support level at Rs 1,704. Once it is breached, they added, the futures could further drop to Rs 4,622 in a week's time "" a decline of over Rs 150 a quintal.