Chilli dips on low demand

The futures prices of chilli are continuously tumbling. Various factors, such as declining demand, arrival of low-quality new crop and expectations of a higher production this year are pushing prices southwards.

On the National Commodity & Derivatives Exchange (Ncdex), chilli futures prices fell by over 9 per cent to Rs 6,170 a quintal on Thursday against the last week's close of Rs 6,824 a quintal. Running in tandem, the spot market too is seeing a downward rally.

In Guntur, spot prices have slipped to the range of Rs 6,000 to Rs 6,600 a quintal from the earlier levels of Rs 6,800 to Rs 7,500 a quintal.

"On the back of a lacklustre demand and expectations of better production, the chilli prices are set to remain in the bearish phase. Levels of Rs 4,000 a quintal cannot be ruled out in the next 2 to 3 months," said Indranil Mukherjee, a commodities analyst with Religare Commodities.

The new crop has started arriving in Andhra Pradesh, Tamil Nadu and Madhya Pradesh. However, the quantity is less and the quality is poor with more moisture content.

According to traders, demand from Bangladesh, Sri Lanka and Malaysia has declined on the back of higher prices and quality concerns.

"In Malaysia, there were some disputes over quality. In the case of Bangladesh, the country has its own green chilli crop. So, exporters are not playing a vital role in the market," said a Mumbai-based chilli trader.

Interestingly, the exporters had managed to sustain the prices at higher levels.

According to market estimates, Guntur in Andhra Pradesh is receiving about 1,500 bags (each bag of 40 kg) each week. In Madhya Pradesh, the arrival rate is about 50,000 bags a week.

"This is a precursor to the arrivals, which are going to increase by mid-January," sources added. Analysts estimate that this year's production is expected to reach 11 to 12 lakh tonne against the last year's 6 to 7 lakh tonne.

The prices had reached historic highs this year. Corrections are inevitable and they have to go down," said a trader. Though, it is not possible to reach out to the levels of Rs 2,500-3,000 in the short term, the process has started, the sources added.

According to commodities analysts, so far there has been no intimation for new contracts from the exchanges.

Commodity exchanges across the country have been directed by commodity markets regulator Forward Markets Commission not to launch fresh red chilli contracts unless quality goods are available in the physical market.