Red chilli prices firm on shrinking acreage

Despite huge carryover stocks of about 28 lakh bags (1 bag = 40 kg), spot red chilli prices are looking firm this year because of a huge fall in acreage.

Today, spot price of red chilli in Guntur (known for its speciality) was moving in the Rs 2,500-2,800 a quintal range, against both March and April futures on National Commodity and Derivatives Exchange (Ncdex) quoting at Rs 3,260 a quintal.

June futures today opened at Rs 3,210 a quintal and jumped to an intra-day high of Rs 3,325 in the afternoon.

Future prices are currently higher than spot prices due to projected decline in output this year. "Red chilli acreage this year is half of that of last year. Hence, output too is expected to fall 50 per cent from 13 million tonne last year," Ashok Dattani of Ashok & Co said.

Red chilli prices are expected to surge in June owing to supply shortage, but the scenario will be clear after January when crop position in China and Pakistan is known. "These countries are strong competitors in the international markets and hit realisations once international demand surfaces," Dattani added.

Red chilli prices suffered a setback during the sowing season owing to supply abundance and slid to Rs 1,500-1,700 a quintal. This discouraged farmers a lot. They ended up sowing much lesser seeds on fears of lower realisations, in comparison with sowing costs.

Secondly, fears of cyclone, following several warnings, also hit the farmers' sentiment, and they chose not to waste their resources. But, incidentally no damage has yet been done and nothing is really expected till harvesting, starting by the end of this month.

Both January and February red chilli contracts on Multi Commodity Exchange closed at Rs 2,830 a quintal recently.

This calendar year, exports volume is expected to dip around 50 per cent owing to projected shortfall in output and constant rise in demand. India exported about 0.13 lakh tonne of red chilli in 2004-05.

Realisations in the international market, too, depend largely on the crop position in China and Pakistan, which is still not clear. Once a clear picture emerges, prices will take the sustainable direction, experts said.