Chilli hot, close to Rs 7000 mark

Falling stocks and rising demand trigger rally.

Spot prices of chilli are set to hit the Rs 7,000 a quintal mark this week with stocks continuously depleting and new crop expected only in January. Analysts say the existing stocks may not be enough to meet the current trend of rising demand.

"We had a bad chilli crop this year, and the rising domestic demand (owing to the festive season) is supporting the spurt in prices," said Yogesh Mehta, vice-president, Indian Spices and Food Stuffs Association. Chilli production this year was 125 lakh bags against 260 lakh bags last year.

"The chilli market improved from Rs 6,300 to Rs 6,900 a quintal last week on the back of strong demand from Bangladesh and Sri Lanka," said Ashok Dattani, a Mumbai-based chilli trader.

Chilli was quoted at Rs 6,000 a quintal in the spot market in the beginning of September.

"Given that chilli stocks have been reduced to 15 lakh bags (40 kg each) and the current trend is of rising demand, prices are expected to scale up further," he added.

The new chilli crop has so far been sown in only three states "� Andhra Pradesh, Maharashtra and Madhya Pradesh (MP). Commodity analysts said MP crop might arrive in December.

Close to half the current stock "� at 7 lakh bags "� is of premium quality which is normally exported. According to market sources, exports in August rose 8 per cent from July levels to touch 6.5 lakh bags. Indranil Mukherjee, research analyst at Angel Commodities, had something positive to say on the export demand front.

He said, "Demand for exports is expected to be steady in the coming months. Moreover, production in China (the second-largest chilli producer after India) has been lower, so Indian chillies have to meet the demand."

On the price movement in the spot market, Mukherjee did not rule out the possibility of prices touching the Rs 8,000 a quintal level by December.

On National Commodity and Derivatives Exchange (NCDEX), spot prices of chilli today reached a high of Rs 6,958 during the day, up by Rs 202 against last week closing price of Rs 6,756 a quintal.

The country exported 44,000 tonne chilli between April and August this year, 8,000 tonne lower than the 52,000 tonne exports recorded in the same period last year. Further, total exports in 2006-07 would be only half the exports of 1 lakh tonne posted last year, analysts said.

Last year, over production and lower demand knocked chilli prices down to a low of Rs 1,500 a quintal. And, for the whole year, the highest price remained less than Rs 3,000.