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New crop to take sting off chillies, prices may slip now

11 January 2021


Makar Sankranti, which marks the end of winter season and beginning of a new harvest season, usually brings cheer to farmers. This is especially so as the inauspicious Hindu period of Kharmas comes to an end in mid-January.


However, chilli growers could feel the heat rising with the arrival of new crop picking up and putting pressure on prices in the physical markets.


The New Crop Arrivals Have Started Andhra Pradesh, Telangana, Karnataka And Madhya Pradesh, And Are Likely To Peak Over The coming Weeks


"Arrivals of the new crop are expected to gradually pick up pace after Makar Sankranti as the season will enter its peak harvest starting mid-January," said Satish Degala, a trader in Guntur.


The new crop has already started coming into the key wholesale markets of Andhra Pradesh, Telangana, Karnataka and Madhya Pradesh and the arrivals are likely to peak over the coming weeks.


Apart from supply pressure of the new crop, ample carry forward stocks due to low consumption and expectations of a bigger crop in the current season are also seen pushing prices down in the near future, market experts said.


India's chilli production in the current season 2020-21 (Jul-Jun) is seen at 1.7 mln tn, 10-15% higher than the previous year, according to trade estimates.


Andhra Pradesh is the top chilli producer, accounting for around 45% of the country's crop, followed by Telangana, Karnataka, Madhya Pradesh and Maharashtra. And the carry forward stocks of Andhra Pradesh and Telangana combined are projected at 120,000-140,000 tn, according to trade estimates. There are hardly any stocks left in Madhya Pradesh.


In Guntur, Asia's largest chilli market, teja variety is currently being sold at 14,000-15,500 rupees per 100 kg, and the LCA-334 variety is being traded at 11,500-12,500 rupees. Prices of teja variety are likely to decline to 10,000-12,000 rupees after mid-January, and LCA 334 may fall to 8,000-9,000 rupees levels.


Demand for the new crop is currently subdued due to high moisture content, and traders are waiting for Makar Sankranti after which quality of arrivals is expected to improve.


Currently, daily new crop arrivals are in the range of 15,000-20,000 bags (1 bag = 40 kg), and are expected to rise to 30,000-40,000 bags after Makar Sankranti, which is on Thursday. Arrivals are expected to rise further to 90,000-100,000 bags in February.


In Madhya Pradesh, another key producing state, prices of export quality chilli are expected to decline to 11,500-12,000 rupees per 100 kg, from 14,500 rupees currently.


"I don't see any upside for chilli this year as consumption has taken a hit because of the pandemic," said Naval Khaitan, a prominent trader and exporter from Mumbai.


Khaitan said key export destinations like Sri Lanka, Bangladesh, China and Indonesia are buying cautiously as the shipments are getting stuck because of the COVID-19 restrictions.


On the domestic front too, demand from restaurants for red chilli powder is weak as people are still reluctant to eat outside.


However, market participants said that weather could play an important role. Any adverse change in the coming months could act in favour of chilli prices.


"The recent rains in Andhra Pradesh's Kurnool district are likely to delay arrivals of premium quality spice by 10-15 days," said Jugraj Bhandari, president of The Chillies Export Merchants' Association. 



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