Festivals drive chilli rates up by 16%

Spot price of chillies jumped by almost 16 per cent in the wholesale market in the last month from Rs 4,500 per quintal to Rs 5,200 per quintal.

Less acreage , low production coupled with steady demand from neighbouring countries and high domestic demand seem to be outpacing the supply in the country.

With the festive season round the corner in the country and constant demand from neighbouring countries, especially Bangladesh, caused for the prices to climb up. However, total production declined to 5.5 lakh tonne from 8 lakh tonne last year.

In Guntur, one of the major trading centres of chillies, the available stock is around 28 lakh bags.

"There is a steady demand for superior quality from Bangladesh. This will sustain till October. Bangladesh is buying on an average 3,000 to 5,000 bags everyday which can go up to 10,000 bags depending on the availability," said a Mumbai-based chilli trader.

Though the demand from southern and eastern states is limited now, it will rise post mid-August as the festive seasons is approaching. Last month, prices of chillies were between Rs 4,000 and Rs 4,500 per quintal which has risen to Rs 5,200 per quintal now.

This year, the production has almost become half. It was around 2.6 crore bags (40 kg) last year and it fell to 1.25 crore bags this year. Market sources said it was due to less acreage under chilly cultivation which dropped by 50 per cent.

Last year, India had an overproduction of 8 lakh tonne and less demand. Consequently, the prices declined to as low as Rs 1,500 per quintal.

In the past years, chilli prices have even notched up as high as Rs 6,700 per quintal. "At present, stock is less and the local demand will soon rise accompanying Bangladesh's requirements. Chillies may become more bullish," said the trader.

Andhra Pradesh and Karnataka are the leading chilli-producing states. Last year, Andhra's produce was around 1.35 crore bags which dropped to 65 lakh bags this year.

Similarly, Karnataka produced 30 lakh bags (32-35 kg) this year which last year was around 48 lakh bags.

Floods in chilli-growing areas of China (the second largest producer after India) could also attract Indian exports. The sources said stocks in China are completely exhausted which has also put the burden on India.