The Hindu Business Line : Chilli set for correction on hopes of bumper crop

Losing heat
Area under chilli cultivation has increased to 1.3 lakh hectares from 65,000 hectares last year.
Kharif arrivals set to begin from month-end; to last till May.

Mumbai , Jan. 2

After remaining hot till November, chilli prices are set to correct lower in anticipation of a bumper kharif crop in 2007. "Chilli production is expected to touch 1.0-1.1 lakh tonnes in 2007 against 65,000 tonnes last year," said a Karvy Comtrade research report.

High prices realised last year has attracted many farmers into chilli thereby pushing up the area under chilli cultivation to 1.3 lakh hectares against 65,000 hectares last year. The production of chilli in 2005-06 has declined by 35 to 40 per cent because of heavy rainfall.

"Spot prices of chilli in Guntur (Andhra Pradesh) have risen from Rs 4,800 a quintal in August to a high of Rs 7,100 in December. However, the prices have corrected ever since to Rs 6,400 level due to increase in arrivals as farmers released old stocks realising that there will be no further appreciation in prices," said Mr Vishwesh G. Reddy, a trader from Andhra Pradesh. The old stocks in Guntur are estimated to be around 15 lakh bags. The futures price for March delivery on NCDEX has softened from Rs 4,603 a quintal on December 11 to Rs 4,098 on Tuesday.

"Prices may not fall very drastically as export orders may prop up to stem the sliding prices. There are also possibilities of traders stocking up in anticipation of a better price," predicts Mr Sushil Sinha, regional head, Karvy Commodities.

Production of chilli in India is dominated by Andhra Pradesh, which accounts for almost 49 per cent of the total production while Karnataka, the second largest producer, contributes 11 per cent followed by Orissa (7 per cent), Maharashtra (6 per cent), Madhya Pradesh (4 per cent), Tamil Nadu, Uttar Pradesh and others account for the rest.

India is the world's largest producer, consumer and exporter of chilli and contributes 25 per cent to total world production. Of the total production about 30 per cent are of pungent variety which attracts international trade.

India's chilli exports are mostly to Sri Lanka, US, Nepal, Mexico and Bangladesh. In 2006, China also imported huge quantity of chilli from India on the back of poor crop and good demand in their markets.

India exported 1.38 lakh tonnes valued at Rs 499 crore in 2004-05. US was the major importer accounting for 24 per cent of the total exports. Sri Lanka stands second with 22 per cent followed by Bangladesh 13 per cent and Malaysia six per cent.

The kharif arrivals will start in the last week of January in major markets and extend till May end. In Karnataka and Madhya Pradesh the arrivals are expected till mid-February. Chilli continues to arrive throughout the year in the markets as traders stock it in cold storage and release it as price appreciates. Dry chilli can be stored for two years.

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