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India Rain Deficit Causes Chilli Prices to Rise Worldwide

India Rain Deficit Causes Chilli Prices to Rise Worldwide

Chili prices are rising due to deficit in rains all over India and good exports in April and May, traders said Wednesday.

Exports in April were 131 percent higher than a year earlier. chili exports stood at 241,000 tonnes.

India is the leading producer of chili contributing close to 43 percent of the world production followed by China (8.6 percent), and Peru (5.6 percent).

Faiyaz Hudani of Kotak Commodity Services said, "Good exports and deficit rains are likely to push the prices high. The combination of erratic weather and low returns from chili may force farmers to substitute chili with some other crop."

"Lower price levels can lead to fresh buying on the futures counter. Demand is said to be stable in the spot market. Issues with Pakistan chili crop can be supportive for Indian chili," Kotak sources added.

Export of chili is a key factor in pricing of the commodity. Higher exports always translate into higher domestic prices due to the lesser availability of the commodity.

Chowda Reddy, senior analyst with JRG Wealth Management, is also bullish on the commodity on deficit rains.

"Overall chili acreage is likely to come down due to lower rains in the farming region. The return from chili was also low in the last season and farmers are likely to sow lesser area this season," he said.

chili production averages around 1.3 million tonnes annually and the India's southern state of Andhra Pradesh accounts for over 750,000 tonnes.

However, Naval Khaitan, a prominent trader and exporter from Guntur in Andhra Pradesh, is bearish on the market due to the higher level of stocks.

"The stock in the Guntur market is 2 million bags higher compared to the previous year. Rains are not a major problem for chili as they can survive with occasional rains. The concern is the cyclonic rains which come in the last quarter of the year which damages the crop," he said.

He feels that the market would decline after the Ramadan festival preceding the Muslim festival of Eid slated on Aug. 19 and believes that the only positive factor is the demand from China.

Article from Xinhuanet.

Tuesday 28th of August 2012

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