Why chilli peppers are red hot despite a rise in output

Despite the cold storages in Andhra Pradesh and Karnataka getting filled up to 80 percent capacity, traders are not expecting a fall in prices. (Representative Image)

Higher production has not reined in soaring red chilli prices in the country amid rising demand and scant carryover stock.

Average red chilli prices currently range from Rs 200 to 250 per kg with some varieties like low-heat high-colour Bydagi going at a historic high of over Rs 600 per kg. Last year too, prices of this much-exported spice had raced to such heights spurred by a shortfall, but later stabilised around Rs 200 per kg.

Spices Board figures peg the country’s red chill production at 1,957,635 tonnes in 2022-23, an increase of about 7 percent over 1,836,222 tonnes of the previous year. However, a section of traders and exporters feel the production could be almost equal to the previous year.

“The production is equal to supply now and arrivals coming to the market are getting sold as there is a good export demand from countries like China, Bangladesh and Thailand, apart from domestic buying. Besides robust demand, the marginal carryover stock from last year has also caused the prices to remain at a high level,” said Gopal Jamili, MD of Jamili Sarangapani & Co. in Guntur, the hub of red chilli trade in the country.

In recent years, heavy purchases by China have made chilli a hot commodity in the spice export basket. Today, it ranks as the largest exported single spice from the country. Red chilli export earnings crossed Rs 10,000 crore last year for the first time. Shipments touched 516,185 tonnes valued at Rs 10,446 crore in FY23. Though this was a 7 percent drop in volume terms, the value rose by 22 percent over the previous year.

China mostly buys the high-heat varieties like Teja from India as it has good domestic production of low-heat chillies called paprika. The country’s requirement for hot varieties was such that it has continued buying despite the escalation in prices.

The chilli harvest got over in May and the yield was better this year due to favourable weather conditions and lower pest prevalence. However, the last rounds of harvest saw medium-quality chilli arrivals in the market. “The quality was not good towards the end of the harvest. A part of good quality chillies from earlier harvests has gone to cold storages. If China continues buying, then the stock from cold storages might get released,” said AP Murugan, director of Paprika Oleos (India).

Andhra Pradesh, Telangana, Madhya Pradesh and Karnataka account for the majority of chilli crop in the country. Last year only Andhra Pradesh, the largest producer, made significant increases with the chilli crop rising by 50 percent. Production in Telangana saw a 15 percent drop. While the Madhya Pradesh crop rose marginally, Karnataka saw a slight fall in crop, according to Spices Board data.

The production of Bydagi chilli that has heavy domestic consumption is calculated to be around 50 lakh bags (each bag of 35 kg) in Karnataka, almost the same as last year, with more arrivals from the Hubbali region. “Last year around 30 percent were of low quality due to the pest black thrips. This time it is much better with marginal quantities of inferior quality chillies. Farm gate purchases by traders and companies have increased unlike last year when most quantities were bought from the market,” said Basavaraj Hampali, founder of dry chilli platform spiceextra.in.

Poor inventory, delayed arrivals into the market and good demand have all combined to push up Bydagi chilli prices to record levels. “The prices were hovering in the range of Rs 300 to 350 per kg around February. Then it escalated to Rs 550-600 per kg. The price of Kashmiri chilli that has high colour and little pungency went up to Rs 700 per kg,” Hampali said.

Despite the cold storages in Andhra Pradesh and Karnataka getting filled up to 80 percent capacity, traders are not expecting a fall in prices. They reckon that current prices levels will hold firm for a few more months. “I feel that the prices will not come down but will see a rise by July-August when domestic demand goes up,” said Gopal Jamili. The first chilli crop of the new season is expected from Madhya Pradesh by November.

The high prices last year had led to increased sowing in several regions. If the prices remain at the current level or higher, then further increase in chilli acreage is expected provided the southwest monsoon pans out well.