Chilli prices wilt under export demand

Heavy export demand is taking its toll over chilli prices.The condition may become worse this week as domestic demand has gained momentum. Spot prices are expected to rise by around 6 per cent.

Consistent demand from Bangladesh, China, Malaysia and Indonesia will take prices to unexpected highs, said sources."There is an unexpected demand this time from the exporters and they are ready to pay any sum for the commodity," said Ashok Dattani, a Mumbai-based chilli trader.

According to him, chilli prices may touch Rs 5,400 a quintal in the spot market of Guntur. At present, the prevailing price is Rs 4,500-5,100 a quintal. On the futures front too, where commodity analysts had said earlier that Rs 5,100 a quintal will be the upward resistance level, the near month contract has crossed Rs 5,800 a quintal.

Last year, chilli futures have touched historical levels of Rs 8,000 a quintal owing to poor output.

Market sources said that because of wide gap between the spot and futures market, buyers are buying from the spot markets and selling in the futures market. However, according to commodity analysts the following week should see some decline in the futures."It may see a drop of over Rs 200 a quintal," they said. There is a stock of around 50 tonne in the National Commodity and Derivatives Exchange (Ncdex) warehouses, market sources said.

So far, arrivals in the Guntur market have been irregular. It will reopen on Monday. Traders said that arrival will be better on the opening day and can touch 1,25,000 bags (each of 40 kg). But out of it, 50-60 per cent is expected to be picked up by the exporters and the rest by stockists and domestic buyers. There are reports that due to exports, stocks in cold storages are so far not optimum.

According to market sources, there are 27 lakh bags in Guntur cold storage. In Khamam and Warangal cold storages there are 5 lakh and 2 lakh bags of chilli respectively.

In such scenario, when the country's output is estimated to be 2.3 crore bags, over 75 per cent more than last year's output of 1.25 crore bags, earlier reports had suggested prices to come down to as low as Rs 3,000 a quintal. However, now it seems to be a far cry.

Only crop West Bengal, Uttar Pradesh, Tamil Nadu and Punjab can lower the prices in the market.Experts say this is just an exception. But this time it may bring in some relief, if not now, certainly in the next 3-4 months.

Though combined output from these states is not know, but it will be an addition to the present estimated output.