Chilli prices soaring on anticipated output dip

Chilli prices are buoyant on the anticipated drop in production, though the experts feel that the bull phase would not sustain for a long period. They said stock position and the expected increase in yield this time would compensate for the drop in production in the long run.

Prices, that were hovering around Rs 20-25 a kg a couple of weeks back, have soared to Rs 30-32 per kg owing to incessant rainfall in the major producing centres in Andhra Pradesh.

According to reports from producing centres in Anhdra Pradesh prices have been bouncing back and are below Rs 30 now.

There are different opinions in the market about the estimated production during the next season which commences by February next year.

According to the traders here, total chilly farming area has dropped by almost 30 per cent in the current year owing to lower prices fetched in the main production season of 2005.

The average price of Rs 20-24 per kg failed to attract the farmers for cultivation and attributed to the drop in area of farming. About 10 - 20 per cent decrease is expected in the next season. This assumption along with the low pressure in the Bay of Bengal is the major reasons for the higher price tag of red chilly currently.

But exporters said there would not be a major drop in production and if there would be a marginal decrease, better yield and carry over stock in the market would compensate the loss in production.

Last year total production was to the tune of 6,50,000-7,00,000 tonne while in the next season production would be 6,25,000-6,50,000 tonne according to their estimates. According to an official of a major export firm the current cold storage stock is to the tune of 35,00,000-40,00 000 bags( each containing 50 Kg) and the market requirement till the commencement of the next harvesting season would be around 15 lakh bags.

He also said there would be a carry over stock of 20-25 lakh bags in the market even after March 2006 and hence shortage in supply is out of question as per current projections of the market.

He said that total exports would not increase to last year's level due to a host of reasons. During 2004-05 total exports were 1,38,000 tonne valued at Rs 499 crore . This record level of exports was due to crop failure in China and drop in the production of Paprika (colouring chilly) in Mexico and USA.

But this time it is estimated that there would be an increase in crop in China and harvesting season will begin by the middle of November there. During last year even China had imported chilly from India through Malaysia. But India can not maintain the same level of exports during the next season, said exports.

The current exports trend also indicates this as total exports during April - June 2005 had dropped to 34,000 tonne from 39,844 tonne in the same period in last year. Domestic market will have the major say in chilly trading, but market sources do not predict a huge increase as all parameters are against such increase.