Chilli bullish on low supply, rising export demand

Consistent export demand coupled with less than estimated arrivals is pushing chilli prices both in the spot and futures markets. Stockists entering the scene and the year-ending factor have further heated the market.

The traders and analysts had earlier said that on the back of strong fundamentals, overall chilli scenario would remain bearish. However, now it seems the equation is changing.

Arrivals are below the expected rate of 1 lakh bags (each of 40 kg) a day. Today, Guntur market received 80,000 bags, and more than half of it is being exported.

"Exports demand is unexpected. According to market estimates, the strong demand conditions may continue throughout April," said a chilli trader.

In the Guntur spot market, the average spot rates have reached in the range of Rs 4,000-Rs 4,700 a quintal, which a fortnight back was hovering at around Rs 3,200-Rs 3,800 a quintal.

There are unconfirmed reports suggesting less than expected yield of chilli. Market sources said that estimates were made on the basis of 30-35 quintal a hectare output, whereas now, it has come down to around 25 quintal a hectare. Owing to lower yield, the output estimates may slip to 2.1 crore bags from 2.3 crore bags.

However, commodity analysts ruled out any such drop in estimates, and instead attributed export demand and stockists' entry in the market as the major driving forces.

Market sources believe, in the next couple of days spot rates may cross Rs 5,000 a bag, which would mean a rise of over 56 per cent in the last fortnight.