Chilli was one of the very few commodities that showed a fall in rate during the month of July. Higher production expectations, higher stocks, weak demand and poor quality of stocks were the factors which resulted in fall in rates for the commodity.

Higher acreage and low incidence of diseases and use of high yielding hybrid varieties have resulted in possibilities of 10­15% higher production this year to ~13 lakh tonnes – as per traders. Better crop in Andhra Pradesh have created possibilities for that.

The arrivals remained high in the mandis and poor quality of stocks ensured exports too remained weak. Exporters are reportedly waiting for some more corrections in prices before initiating fresh demand.

High amount of stocks in Guntur mandi pressurized the prices further. Traders are however expecting that the current rates are very low and with domestic demand expected to rise in coming weeks from the festive season ahead, further substantial fall in prices may not be there.

Stockists are also reportedly unwilling to sell at these low levels. Exports are also expected to rise at these low levels and that could support the falling rates from a medium term point of view. Fall in production in China and Bangladesh could also be some Bullish factors for the Indian markets if the exports rise from here.

A strengthening in Dollar vs Re could support the export demand further in coming weeks. As per latest reports from Spice Board of India, Chilli exports for the period April June this year rose to 68,760 MT vs 42,700 MT same period last year – thus showing a rise of 33%.

Traders are expecting recovery in rates from these levels which are considered low for the commodity. With a bullish sentiment prevailing in other Spices, there are expectations of Chilli rates also showing recovery in August if exports rise further.

Courtesy: Religare Commodities

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