The downside in chilli prices, both spot and futures, is not over, traders and analysts said.
For now the commodity may trade steady or even edge upwards before it heads down when crop arrivals improve in March and April, they said.
“Chilli prices have the potential to decline by another Rs 500 a quintal from current levels,” said Mr Ashok Jain, a Guntur-based trader.
He expects prices to move down in March and April when arrival pressure would rise. Spot chilli prices were quoted at Rs 6,482 a quintal in Thursday's early trade at Guntur in Andhra Pradesh.
Chilli crop is expected to be higher this year. Last year the crop was estimated at 8 lakh tonnes (lt).
This year crop estimates vary between 10-12 lt and 12-13 lt.
Last month, chilli farmers in Guntur held a protest rally to draw the Government's attention to the scenario of declining prices.
Chilli prices declined to Rs 5,000 a quintal from a peak of around Rs 10,000 as expectations of the crop improved, analysts said.
“The market moved down on reports of a good crop in Madhya Pradesh,” said Mr Jain.
Futures trend
The overall long-term trend in chilli futures is likely to be down but in the near-term prices would trade steady and probably move up slightly.
The fall in prices of the 334 variety which is traded in futures has been muted mainly because this variety is exported. “Until fresh arrivals pick up prices are likely to be slightly up,” said Ms Nalini Rao, analyst at Angel Commodities.
Arrivals are likely to pick up by the end of February, she said.
Inflow of chilli crop in Guntur declined to 50,000 bags (one bag contains 45 kg each) and this includes 35,000 bags new crop, MangalKeshav Commodities said.
Once arrivals pick up prices may decline by another Rs 1,000 more, said Mr Chowda Reddy, Senior Analyst, JRG Wealth Management.
But export demand that is likely to emerge after April would be supportive, he said.
He does not expect prices to fall below Rs 5,000 but there is a good support at Rs 5,500.
Ms Rao also expects March futures on the National Commodity and Derivatives Exchange to find good support at the same level.
Chilli futures for March delivery ended lower at Rs 5,714, down 1.11 per cent on the NCDEX.