Chilli futures to remain weak on fresh arrivals

Chilli futures on the National Commodity and Derivatives Exchange are expected to be range-bound with a negative bias in the week ahead on rising arrivals in key spot markets, analysts said.

Spot chilli prices are likely to slip Rs 1-2 a kg on rise in good quality arrivals, traders said.

However, the downside is limited by good buying interest from processor companies and exporters. Demand will also stabilise as quality of arrivals improves, analysts said.

Spot market
Guntur spot chilli prices are likely to ease by Rs 2 from Tuesday's price of Rs 33-37 a kg as arrival pressure rises but good demand will stem the fall, traders said.

On Tuesday, arrivals in Guntur were at 60,000 bags (1 bag=40-45 kg), down slightly from 80,000 bags Monday.

There is firm demand from domestic traders and exporters but instead of buying available stock, traders prefer paying a premium for high quality stock as between 50-75 per cent of daily arrivals are still moisture-heavy.

By next week, all the rain-soaked stock will have been cleared from the market and good quality arrivals will rise, to even above 100,000 bags a day, Jugraj, a Guntur-based trader said.

"Corporate entities such as ITC are just on the sidelines awaiting good quality arrivals as most of the existing stock in the market does not meet our requirements," an ITC official involved with spices procurement said.

Chilli prices in Indore were at Rs 35-39, down Rs 3 from last week, and weekly arrivals were at 35,000 bags, said Vinod Jain, a local spices dealer.

Indore spot prices are likely to fall by Re 1 in line with Guntur markets, but demand from Madhya Pradesh and Bihar will keep prices stable, traders said.

Futures trend
Chilli futures are likely to remain mostly range-bound, reacting closely to the rise and fall in arrivals in Guntur and Indore markets, analysts said.

The support for NCDEX March contract is at Rs 3,798 a quintal, with crucial resistance at Rs 4,102. Analysts said downside is limited by the fact many farmers are holding back stock as they are awaiting higher prices, which will come with the advent of export demand.

"Easing weather conditions in Guntur has helped maturation, picking and drying of the new crop which is likely to start reaching the market in full force in the first week of March," said Nalini Rao, research analyst, Angel Commodities. Rao is of the view that if arrivals surge to 120,000 bags a day in Guntur, then prices could ease slightly in the futures market.

At 2:58 pm, March contract was at Rs 3,980 a quintal on NCDEX, up Rs 3 from Monday.

April contract was at Rs 4,074, up Rs 27.