Chilli futures no longer hot, falls 10% in 3 days

Red chilli futures today crashed with all contracts dropping, while the spot market remained almost steady at Rs 4,200-4,500 a quintal. The June contract at the National Commodity and Derivatives Exchange of India (NCDEX) dropped 10.21 per cent to Rs 4,510 by mid-day from Rs 5,023 on June 1. On June 3 the contract plummeted to Rs 4,894 signalling the bearish tendencies.

The July contract plummeted to Rs 4,831 from Rs 5,278 on June 1, August contract fell sharply by Rs 457 to Rs 5,110 while the September contract dropped from Rs 5,708 to Rs 5,300.

Experts said the rather low domestic demand caused the fall in futures prices. The weak demand was mainly due to increased import from China especially by manufacturers of value-added products. A section of traders, however, said the fall was an inevitable correction after the market had spurt to higher levels during the last few weeks.

The unprecedented drop futures prices has created panic in all major markets across south India, but weak selling pressure helped spot prices remain almost steady. Due to lower output during the 2006 season, market sources do not expect a crash in spot prices.

Domestically 5,00,000 tonne of chilli is consumed annually. Supply is expected to be almost at par with demand. Total production in the 2006 season, which ended in April, is estimated to be around 3.5 lakh tonne, with carryover stock estimated at 2,00,000 tonne.

As global markets are not favourable for export, supply will be strong in the domestic market ensuring steady prices for the next few months. At present, Indian chilli is priced at above $1,500 a tonne in the international market.

Pakistan, however, offers stemless dundicuts variety at $1,000 a tonne while China offers low heat, high colour Yiddu grade at $1,050 and stemless Tianjain at $1,200-1,250. Import from China is very active at present as extractors and oleoresin manufacturers are fully dependent on imported chilli owing to the price advantage.