Too hot to handle: chilli prices on upward spiral after Guntur fire

Too hot to handle: chilli prices on upward spiral after Guntur fire
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First Published: Mon, May 05 2008. 10 23 PM IST

Running for cover:Workers trying to salvage goods as a fire sweeps across Asia’s largest chilli market in Guntur, Andhra Pradesh on Saturday. It gutted around 200,000 bags of 40kg each
Running for cover:Workers trying to salvage goods as a fire sweeps across Asia’s largest chilli market in Guntur, Andhra Pradesh on Saturday. It gutted around 200,000 bags of 40kg each
Updated: Mon, May 05 2008. 10 23 PM IST
Mumbai: Indian chilli prices are likely to rise by 11-12% following a fire in the Guntur market in Andhra Pradesh on Saturday, but exports may not be affected as quality stocks are available in cold storages, traders and exporters said.
A fire in the Guntur market, the biggest spot market for chillies in India, on Saturday gutted around 200,000 bags of chillies, 40kg each, said Mahesh Chandra Laddha, superintendent of police, Guntur district.
Running for cover:Workers trying to salvage goods as a fire sweeps across Asia’s largest chilli market in Guntur, Andhra Pradesh on Saturday. It gutted around 200,000 bags of 40kg each
Traders in the spot market said the wholesale price may go up to Rs4,700-4,750 in the next one month. Chilli quoted at Rs4,227 per 100kg in Guntur on Friday.
“Already there was a shortfall of good quality produce due to rains. The fire has widened this gap. Prices of premier quality produce are bound to rise,” said trade Alapati Srinivasa Rao.
Andhra Pradesh, the biggest producing state, had received unseasonal rainfall in March, which hurt the quality of the crop in some areas. Rainfall forced traders to slash the output estimate for 2007-08 by 14% to 1.2 million tonnes (mt). In 2006-07, India’s output was 1.2mt, traders estimated.
“Due to logistics problems, traders may find some difficulties in the next few days, but in the long term, there won’t be any impact on exports,” said A.P.J. Arun, an exporter based in Guntur. He said cold storages hold around 4.8 million bags, including 1.5 million bags of superior quality, sufficient for exports.
In the first 11 months of 2007-08, chilli exports rose 37% to 169,000 tonnes, compared with 123,330 tonnes a year earlier. Good demand from Pakistan, Malaysia and Bangladesh was supporting prices this year, Rao said.
The benchmark June contract on the National Commodity and Derivatives Exchange rose 4.02% to Rs4,918 per 100kg on Saturday.
“Futures already rose anticipating shortfall. Now, prices will rise, but there would not be a rally in futures market,” said Faiyaz Hudani, an analyst with Kotak Commodity Services Ltd.
Futures may hit upper circuit of 4% on Monday due to the fire, said an analyst at Karvy Comtrade Ltd.
The Guntur spot market, which was to have closed for a month from the second week of May, will now shut a week earlier. It will reopen in the first week of June.
Every year the market remains closed for one month in summer as high temperatures make handling of the pungent spice difficult.
Dungarchand Kanungo, a trader based in Guntur, said farmers in Andhra Pradesh are still holding around one million chilli bags and they will bring this stock once the Guntur market starts functioning.
“Speculation will drive the market. Overall, there is no shortage from supply side,” Kanungo said.
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First Published: Mon, May 05 2008. 10 23 PM IST