The Chilli prices continued the bearish trend on extended selling pressure during last week. Futures started the week on positive note on lower level buying.
Reports of delay in fresh arrivals of 334 variety (exchange traded) supported the prices to trade up.
However, later on prices turned down on rise in arrivals of fresh Teja crop at spot market along with poor export demand. Therefore, on cues from futures traded down and closed on negative note.
Outlook
Chilli prices are expected continue the volatility on prevailing fundamentals. Rising arrivals of Teja variety at spot market of Guntur might further pressurize the prices.
Higher production estimates as compared to the last year are also weighing on prices. However, delay arrivals of exchange traded 334 variety which is are expected to start by mid of February might cushion the prices later in the week.
Factors to watch out
Arrivals at Guntur chilli market remained in the range of 15,000-35,000 bags
Andhra Rabi chilli area is reported around 0.49 lakh ha as on 25th January against 0.44 lakh ha year ago
As per data released by Spices board, during Apr-Nov, 2011 chilli export from India were reported down by 24% to 1,32,500 tonnes against the same period last year
As per Spices Board data, international price of chilli in New York market remained stable to $3.53 per kg during the week ended January 20th 2011 against $3.20 per kg quoted in the same period last year
Derivative Analysis
The NCDEX chilli February contract prices, volumes and open interest have declined. It is a good indication that the price decline is being caused by disgruntled long position holders being forced to liquidate their positions.
Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.
Courtesy: Karvy Commtrade Ltd.
