Rising output pulls down chilli prices

Envisaging chilli at Rs 30-40 a kg may have been a far cry some time ago, especially when prices were notching up to Rs 7,000 a quintal in the domestic market. However, it is likely to be true, at least in the coming year.

The reason for the declining prices is the estimated chilli production in 2006-07 at around 70 per cent more than what it was last year. The crop is expected to be normal and better than that of the last year, when the country witnessed a fall of almost 50 per cent at 1.3 crore bags (each of 45 kg).

"We are expecting a total production of 2.2 crore bags this season across the country," said a market source. He added that prices have already started falling and the Rs 7,000 mark may turn out to be history soon.

As the chilli market this year saw new highs, farmers returning to chilli cultivation could be a probable reason behind the surge in production estimates.

"On the back of high production estimates, prices may dip to Rs 4,000-4,500 a quintal," said Yogesh Mehta, vice-chairman, Indian Spices and Food Stuffs Association. However, market sources did not rule out the possibility of a further dip to Rs 3,000-3,500 a quintal by February.

Between January and November in 2006, the country exported 70,000 tonne as against 1,25,000 tonne during the same period in 2005. In 2007, the exports are expected to be around 1,25,000 tonne.

Meanwhile, there are unconfirmed reports that the chilli crop in China and Pakistan (the two main competitors of India) is weak for the year. This may put additional pressure on India. The country's chilli normally goes to Bangladesh, Sri Lanka, Malaysia, West Asia and Europe. "Even if exports are on the higher side this year, it will have no impact on the domestic market," said Mehta.