Chilli prices seen flat on weather irregularities

Spot prices of chilli are seen flat-to-high during the week owing to erratic weather which may hamper arrivals, said traders on Tuesday.

Also, trade is likely to remain quiet as key markets are shut for Holi on Wednesday. However, March futures on the National Commodity and Derivatives Exchange are seen down on profit sales.

"Currently the climate is not favourable. The absence of sunlight is making it difficult for both the farmers and the sellers to dry the chillies," said Vinaykanth of Guntur-based Vinay Spices.

Last week, heavy rains had occurred in most parts of India causing damage to crops.

"Due to the rains, 10 per cent of the new crop has become wet and hence arrivals are likely to get disturbed," said Vinayak N V, an analyst with Karvy Commodities.

Traders also said rains have increased the dampness and moisture content in the chillies.

"Once the moisture in the chillies increases, the quality of the spice deteriorates making it difficult to store for the stockists," said Vinaykanth.

Last week, on an average 20,000 bags (1 bag is 40-45 kg) arrived at Guntur. Prices were in Rs 2,800-3,000 per 100 kg range.

"Arrivals are likely to be irregular this week as chillies are wet and there are logistics issues as well," said Vinaykanth.

"Since markets will be shut for Holi on Wednesday, trade could be irregular with traders in a holiday mood," he said.

Traders expect Guntur prices to stay around Rs 2,800-3,800 per 100 kg. Prices in Indore, however, skyrocketed last week as arrivals began to taper, and were quoted at Rs 4,500 per 100 kg. Traders expect the same rate to continue this week as well.

"Crop from the Madhya Pradesh region has been disposed off," said Vinod Jain, an Indore based-trader. He added, however, that the rains did not have any cascading effect on the crops as the state has already harvested its share of chillies.

However, the March chilli contract on NCDEX is likely to slip into the red owing to profit realisation by traders ahead of the expiry, analysts said. The contract expires on Monday.

However, traders said weakness in prices was only a temporary phenomenon and prices of far-month and April contracts will climb, as the fundamentals are strong.

"Chilli is the only commodity whose monthly spreads are the greatest," said Unupam Kaushik, director, Anagram Commtrade.

The spread between the March and April contracts is around 15 per cent, between March and July it is 40 per cent, said Kaushik.

The April contract is likely to see a high of Rs 4,150 per 100 kg and a low of Rs 3,660, said Kaushik.

March contract is likely to see an upside of Rs 3,400 per 100 kg and a downside of Rs 3,250, said Vinayak.

At 1518 IST, the March contract was quoted at Rs 14 lower at Rs 3,390 per 100 kg.