Red chilli supply shrinks, prices soar as surplus rains, pest attacks ruin crops

"The average chilli price is hovering around Rs 200 per kg compared to Rs 150 per kg last year. The traders are buying the stock as and when needed only despite a low carryover stock," Peraiah said. The market in Guntur in Andhra Pradesh, the primary trading centre, is closed for summer holidays and the cold storages in the state are yet to be full.

A crop virus due to climate changes during the heavy rains has also shrunk the availability of good quality chilli, which sell at premium prices. Exporters reckon that this will affect the export earnings at a time when higher prices are limiting the offtake by the overseas buyers.

According to the market updates of Olam Spices, a part of the international food and agri-business company Olam International, pest & disease infestation led to a sharp drop in the current year yield in India compared to the previous year leading to lower production despite acreage increase over last year. Overall, the quality of the crop is poor compared to normal. The availability of pesticide residues compliant crops is less this year. The 2022 supply is expected to be tight, especially for good quality and pesticide residue compliant grades.

"Price will be the deciding factor. Countries like China are heavily dependent on India for high heat varieties. So, they may be compelled to buy despite the high price but the quantity will be lower," said Shivkrishna, director, NK Agro Exports, leading exporter of the spice.

In the last few years, China has become the largest buyer of Indian chilli. Of the 6,01,500 tonnes chilli worth Rs 8430 crore exported by India in 2020-21, China’s share came to 1,80,221 tonnes, about 29% rise in volumes from its purchase in the previous year. Bangladesh, the second biggest purchaser, imported 1,19,615 tonnes from India.

The rising waves of the pandemic in countries like China have also restricted the chilli imports. "The restaurants in many places are still remaining closed. Also, China bought heavily last year which may lead to a higher inventory of chilli in the country," said AP Murugan, director of Paprika Oleos, another exporter.

Usually when the premium quality is expensive the importers go for medium quality chilli. But this time, even the medium quality chillies are ruling high. "But if the Chinese economy picks up, they may import more as the existing stock may not be sufficient," Shivkrishna said.

As per the market report of Olam Spices, Covid 19 outbreak constraints in the supply chain continue to affect the availability and movement of raw materials in the markets and impact trade in China. Processors are evaluating options to offer non-Xinjiang originating material through other regions but transparency to true origin continues to be a challenge, The price is expected to rise due to energy cost increases, exchange rate impacts, and labour cost increases.

The chilli exports in 2021-22 have remained flat in terms of value as per the available data of the Spices Board. For the period April-December 2021-22, India exported 435,724 tonnes worth Rs 6522 crore. While there is only marginal decline in the value, the volumes are down by 8% compared to the previous year.

Since India consumes majority of chillies produced here, a pick-up in the domestic demand after the monsoon could push up the prices further. Regular traders need a variety of chillies for blending which could be in short supply. The quantity of their purchases will depend on the prices.