Traders have not been selling the chilli stock at lower rates and are hoping that domestic demand will shore up the prices a little and that exports to China will improve this year.

Red chilli prices, which have dropped from the peak levels in last March, could see another spike on higher festival season demand and weak rains in the coming weeks.

The average prices of the most exported single spice from India have dropped from Rs 250 per kg to around Rs 230 on subdued export demand, resulting in the accumulation of sufficient inventory to last till the arrival of new crop by next January.

The cold storages in Andhra Pradesh, the chief chilli producer, have around 35 lakh bags of chilli (each bag of around 35 kg). “But the traders are not willing to sell at a lower price, stock they bought when the prices were ruling higher. But the buyers are also reluctant to purchase at the current price levels,’’ said Gopal Jamili, MD of Jamili Sarangapani & Co. in Guntur, the hub of red chilli trade in the country.

Usually, domestic demand spurts during the Dussehra festival season. “If that happens, then chilli prices may gain further,’’ pointed out Laxmikant G, Product Head, Chilli of Agro Crops. Weakening of the local demand has led to cooling of the prices of the low-heat Bydagi chilli. This variety of chilli which has huge domestic consumption, including procurement by curry masala makers, is now going at around Rs 550 per kg, down by Rs 50 from a few months ago.

The other reason for possible increase in chilli prices is the lower intensity of rainfall expected in coming weeks. While the sowing has been good in the rain-fed areas, the regions dependent on irrigated water are experiencing water shortage. According to Jamili, the Palnadu region in Andhra Pradesh has been short of water and is expecting more rains for higher water flow from the dams.

In Karnataka, the hub of the Bydagi chilli variety, Bellary and Raichur are dependent on irrigation. “The sowing in these areas has been affected by water shortage as the outflow from the dams has been limited,’’ said Basavaraj Hampali, farmer and founder of dry chilli platform,

The sowing has been good in the rain-fed district of Hubli in Karnataka. “Overall, there has been a 25 to 30 percent rise in the chilli acreage this year. Late rainfall and lower prices forced many farmers to shift to chilli from green gram and cotton,’’ Hampali said.

At present, the chilli production estimate for next year is the same or slightly less than the last season. “A clear picture will emerge only by October as there is still time to transplant chilli from the nurseries to the fields. We can expect another two weeks of rain in Karnataka and six weeks of rain in Andhra Pradesh which can result in late sowing,’’ observed Ravipati Peraiah, MD of Vijayakrishna Spice Farms.

In 2022-23, the total chilli production in the country touched 1,957, 635 tonnes, an increase of about seven percent over the previous year.

Chilli exports, which started on a strong note at the beginning of FY24, have slackened with China going slow on purchases. “Bangladesh, Thailand, Sri Lanka are all still buying chilli from India but at a slow pace. Even Chinese purchases are sluggish,’’ said A P Murugan, Director of Paprika Oleos (India) Ltd.

Spices Board data for April-June 2023 show robust export at 1,36,527 tonnes valued at Rs 3,032 crore. This is over 30 percent higher in volumes and 58 percent above the value in the same period of the previous year. In FY23 India exported 5,16,185 tonnes of chilli at a record Rs 10,446 crore. While there was a seven percent drop in quantity, the value surged by 22 percent year-on-year.

Chinese imports later during the year will be crucial in raising the chilli shipments from India. China buys mostly the high-heat chilli Teja from India as its own output is the low-heat paprika variety. China’s chilli crop is due by October-November. “There are reports of cyclones in parts of China, which may have an effect on the chilli crop. If China imports more Indian chilli, then domestic prices may shoot up,’’ Jamili said.

The late setting in of southwest monsoon could delay the arrivals of the new crop by a month. The chilli crop from Madhya Pradesh, which usually arrives first around October could be delayed to November this time.

`The peak arrival period may get extended from the usual March-April,’’ Peraiah said. Though the anticipated showers in the coming weeks are expected to bolster the chilli crop, farmers are also wary about pests such as black thrips. Triggered by continuous intensive rainfall, the pest led to widespread damage of the chilli crop over a year ago.

“Though farmers have found out ways to deal with black thrips to reduce the scale of damage, a permanent solution would be development of high-yielding, disease-resistant chilli varieties,’’ Hampali said.

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