Chilli spot, futures likely to decline on arrivals

Chilli futures and spot prices in the key market of Guntur in Andhra Pradesh are likely to be weak, especially after Diwali, as arrivals exceed supply and due to high stocks in Guntur warehouses, traders and analysts said.

In Guntur spot market, chilli is seen at Rs 37-44 per 1 kg, but prices are likely to fall further on high stocks in local warehouses and rising arrivals, local traders said.

"The sharp downtrend in prices has begun and farmers are now looking to sell off their stocks and earn their income, which is leading to high arrivals in the market," said Hari Om Maheshwari, a Guntur-based trader.

Stocks in Guntur warehouses are still high at around 2.2 million bags (1 bag=45-50 kg) while stocks all over Andhra Pradesh are over at 3 million bags. Today, Guntur chilli prices were at Rs 38-42 a kg, down from Rs 40-44 on Monday.

Arrivals were at 65,000 bags today, but only 35,000 bags were sold until 11 am, traders said.

"Demand for chilli is weak and is expected to dip even further after Diwali (on Friday) which will also be the time when high stocks will start reaching the market," another Guntur trader said.

Indore chilli prices were down Rs 2-3 per 1 kg to Rs 40 per 1 kg on unofficial estimates that Madhya Pradesh crop may rise to 4 million bags from 3 million bags last year, Vinod Jain, an Indore-based trader, said.

Traders from Madhya Pradesh, Uttar Pradesh, Bihar and Rajasthan are buying out the current weekly arrivals of 50,000 bags, local traders said.

Indore prices are likely to weaken by a further Rs 2-3 per 1 kg in the coming days, as arrivals are likely to increase to 150,000 bags per week, outstripping demand.

Futures trend
On NCDEX, November contract is likely to be in Rs 4,300-4,550 per 100 kg range, but susceptible to fall to Rs 4,200 during the week as arrivals in Indore and Guntur markets rise, analysts said.

NCDEX chilli stock stood at 80 tonnes on Saturday, down from 154 tonnes last week. However, analysts feel that low stocks are unlikely to be major factor as stocks in physicals markets are at very high levels.

"The likelihood of a fall in prices is high as spot markets are weak and arrivals are surging, but the volumes on futures are so low that it is very difficult to give a clear direction," Faiyaz Hudani, research analyst, Kotak Commodity Services, said.

Analysts are not even issuing calls on chilli anymore as trading volumes are too thin, which may lead to high volatility in prices even if volumes rises or falls marginally.

At 12:30 pm, the November contract was at Rs 4,431 per 100 kg, down Rs 23, or 0.52 per cent from Monday's close.