Chilli hot on fear of arrival delay

Chilli prices in the domestic spot and futures markets rose on reports of delay in new arrivals coupled with low inventories leading to widespread buying by stockists, traders and analysts said.

Also, robust export demand from Bangladesh and Sri Lanka kept prices firm, they said.

In Guntur, the main spot market, the 334 variety, which is the most superior variety, was offered at Rs 6,000 per 100 kg, up Rs 20 from close on Wednesday.

September contract was up 1.49 per cent at Rs 5,729 per 100 kg on the National Commodity and Derivatives and Exchange (NCDEX), while October contract was up 1.62 per cent at Rs 6,008.

Traders expect prices in Guntur to test Rs 6,500 per 100 kg by next week. "It is the fear of delay in fresh arrivals that has soared the prices in both spot and futures market," said Killari Venkata Rossiah, president, Guntur Chilli Merchant's Association.

On one hand, erratic rainfall in Guntur, Andhra Pradesh, the leading growing region in the country, affected the sowing of chillies and hence the new arrivals will come only by Feb-Mar, delayed by one and a half month, Rossiah said.

On other hand, heavy rains in Madhya Pradesh, another main producer, have led to damage to crops. However, there are contradictory reports regarding the extent of damage in Madhya Pradesh.

"The correct estimates would come only after a proper survey has been done. But arrivals from here (Madhya Pradesh) will be delayed and would now come by December-end rather than in October," a trader in Indore said.

Andhra Pradesh, Madhya Pradesh, Karnataka, Tamil Nadu, and Maharashtra are the main growing regions. Also, low inventories in cold storages in Guntur are aiding the rise in prices.

"There are in total 2.5 millon bags of chilli in cold storages here (Guntur). Out of the 2.5 millonm bags, 700,000 bags are of NCDEX, 300,000 bags are white chillies, 200,000 bags are meant for powder and rest is used for internal consumption," Rossiah said.

"In a month, on an average 600,000 bags are being sold and thus we require inventories of 3.6 millon bags," he said.

Export demand: "On an average, we are receiving export enquiries around 300 tonne of which 150 tonne is being sent to Bangladesh and rest to Sri Lanka," he said.

Depletion of stocks in Bangladesh and fall in output in China, one of the world's largest producers, due to floods has attracted overseas buyers to India. However, despite bullish fundamentals, traders said prices could be subject to some correction as the rates have risen astronomically.

"Prices in the retail market would be higher than the wholesale, which would deter buyers. Eventually, lack of demand will pull prices down," Rossiah said.

"Prices in Indore are ruling at Rs 5,500 per 100 kg but we have already started to witness a fall in sales," said Kishore Rathod, a trader in Indore.