Chilli prices seen flat on slack demand

Spot prices of chilli are seen flat in the domestic market in the week to Monday due to low demand for the commodity, traders said today. Futures contract for March on the Ncdex is likely to move in a narrow range owing to dwindling trading volumes, analysts said.

"Demand for chilli is very low and the trend is likely to continue till mid-January," said Koteshwara Gupta of Guntur-based Sri Vasavi Chillies & Co. Demand for chillies is low because most varieties have lost their colour and taste, traders said. Also, the warehouses in Guntur have a huge stock of around 2.5 million bags (1 bag = 40-45 kg).

"Although the new crop is 50 per cent lower, there are huge stocks lying in the cold storages in Guntur, which is likely to keep prices steady," Gupta said.

In the year starting November, the chilli crop is estimated at 12.0 million bags, as farmers have switched to other crops owing to the bumper crop of 39.5 million bags last year.

Exports too have stagnated as most traders are waiting for the new crop to arrive, which has been delayed by a month and only expected by February. Delay is because of untimely rains in Andhra Pradesh.

"Most exporters are currently covered for their immediate needs and their fresh purchases will begin when the new crop comes in the markets," said a Guntur-based exporter Jagan Mohan.

However, traders said certain varieties of chilli such as 334, Guntur Sannalu and Roshini Teja have attracted some buying owing to their superior quality. "Except for these three varieties, demand for other types of chilli is almost nil," said another Guntur-based trader.

"Around 20,000-25,000 bags are arriving , but sales are restricted to only 15,000 bags," the trader said. This is because retail buying remains low.

Spot prices of chilli could remain in the Rs 2,600-2,700 per 100 kg range, said Mohan.

March contract is likely to move in a narrow range as trade volumes are dwindling, analysts said.

"There are hardly any fresh triggers that could motivate traders to take fresh positions," said Ravishanker, analyst at Geojit Financials.

At 1205 IST, March contract quoted at Rs 2,966 per 100 kg, down Rs 37 from the previous close.

"March contract is likely to face resistance at Rs 3,100 per 100 kg and the support is seen at Rs 3,000 per 100 kg," said Ravishanker. Also, speculative interest has waned in absence of volatility, he said.