Rising output to dent chilli prices

With an increase in chilli output this season, chilli market is expected to experience a downward pressure which could turn out to be a long term phase for the crop during 2007-08.

This would be contrary to farmers' anticipation that chilli prices, similar to last year, could scale up as high as Rs 7,000 a quintal.

The arrival of new crop will start by the end of October, especially from Madhya Pradesh. Initial market estimates peg the crop output between 2.8 crore and 3 crore bags (each of 35 kg), up around 20-25 per cent against previous year's production of 2.4 crore bags. 

DOWNWARD PRESSURE
Chilli production in the last 5 yrs
Year	Production (in cr bags)
2003-04	2.50
2004-05	2.40
2005-06	1.30
2006-07	2.40
2007-08*	2.80
* If the yield is normal at 30 quintals an acre
Earlier output estimates for '07-'08
State	Production (in lakh bags)
Andhra Pradesh	150
Karnataka	45
Madhya Pradesh	35
Maharashtra	12

"With such a bumper crop expected this season and there has been no adverse weather conditions so far, market is expected to come down to as low as Rs 3,500 a quintal," said a Mumbai-based trader.

By November and December, crop from Andhra Pradesh, Karnataka and Maharashtra will flow. By January the arrival momentum will pick up reaching as high as 1 lakh bags a day.

On Friday, Guntur (delivery and a production centre) witnessed an arrival of 40,000 bags. However, offtake remained at 20,000 bags. Unexpected low domestic demand in the chilli has puzzled market experts.

According to commodity analysts whatever demand normally comes, comes by October, as beyond this arrival season starts. As the holy month of Ramadan has begun, marketmen expects some surge in demand.

"However, surge will not be so drastic that it would take the prices substantially up," said analysts. The country, which consumes around 150 lakh bags of chilli annually, presently has an overall stock of around 40 to 45 lakh bags.

Factors which can alter the expected course of the market movement include unfavourable weather conditions and surge in exports.

Though Bangladesh, Sri Lanka, Malaysia and Indonesia are the buyers of Indian chilli with Bangladesh playing a vital role, market sources said that emergence of Vietnam as chilli producer could prove to be a threat to Indian market. Meanwhile, better crop from China too could snatch Indian overseas market to some extent.

In Guntur market, spot rates have been steady and range-bound over the last one month, oscillating between Rs 3,800 and Rs 4,500 a quintal. On the National Commodity and Derivatives Exchange, the delivery for October contract closed Friday at Rs 4,557 against the previous close of Rs 4,580, down Rs 23 a quintal.