Chilli to remain weak till Dec on low demand

Chilli prices on National Commodity and Derivatives Exchange and in the key Guntur spot market are expected to be weak till December on low domestic and export demand, traders and analysts said.

Expectations of higher arrivals and very high stocks in Guntur warehouses are also likely to push prices southwards, they said.

However, the fall will not be very sharp as many traders are likely to wait until the release of Andhra Pradesh's crop estimates before deciding whether to sell or hold on to stocks.

Stocks in Guntur warehouses are between 2-2.5 million bags, down over 50,000 bags (1 bag=45-50 kg) from the same day last week.

"Farmers are increasing supplies to the markets, which has led to average daily arrivals rising to 50,000 bags from around 20,000-30,000 bags two weeks ago," Naresh Sharma, proprietor of Guntur-based Mirnal Exports said.

Traders expect selling pressure to increase as more and more farmers start offloading their stocks. This is expected to push up arrivals to 70,000-75,000 bags in the coming days.

Domestic demand is mostly weak and expected to fall further following the end of the Diwali festival demand over the weekend, Sharma said.

Chilli prices in Guntur spot markets are expected to fall to Rs 35-38 a kg, down from the current range of Rs 39-41, Vinayak NV, research analyst, Karvy Comtrade said.

Even export demand is not likely to help prop up prices as volumes of sales to Bangladesh are just 2,000-3,000 bags a day when total sales are at an average of 25,000-30,000 bags, analysts said.

"Demand from Bangladesh will help support prices only till around November 20 as export demand from the country will then cease until 'Bakri-Eid' in December," Hari Om Maheshwari, a Guntur-based trader said.

NCDEX chilli futures are likely to fall to Rs 3,800-4,200 a quintal weighed down by expected rise in chilli arrivals in the coming months as acreage has risen by 150,000 hectare to 1.45 million hectare, Vinayak said.

However, Killari Venkata Rossiah, president of Guntur Chilli Merchant's Association warns that the fall in prices may not be very sharp, as out of the total Guntur stocks, just 1 million bags are of superior variety.

There are also reports of damage to the Madhya Pradesh crop, which may further support prices at lower levels as market had been expecting nearly two-three times of last years' produce from Madhya Pradesh this year.

But, according to current estimates, Madhya Pradesh crop is likely to be mostly unchanged at around 1.5-2 million bags. This is much lower than early market talk of four-five bags, Rossiah said.

Some traders are also concerned that the Andhra Pradesh chilli crop, which was expected around end-December, may be delayed due to rains and arrivals may only begin late January.