Chilli spot prices scaled new all time high during the past couple of weeks spurred by restricted supplies in major mandies against strong stockiest and exporters demand. 

As per crop estimates, total chilli production of the current year (2010-11 ) is likely at 250 lakh bags ( 1 bag = 40 kgs ) against 300 lakh bags reported last year , down almost 16%. Moreover ass per traders, quality of new crop is not that much good which is creating demand for old stock in market; while old stocks is very limited which is likely to support the prices. 

The total production of Andhra Pradesh , a major chilli producing state is estimated at 120-123 lakh bags against 155-160 lakh bags reported last year. The major factors such as weak sowing acreage along with erratic monsoon activity in the month of November might result to steep short fall in the current year. The total sowing acreage of chilli crop reduced by 4000 hecatres to 42000 hectares in the current year as most the farmers shifted towards kapas crop with the anticipation of strong returns. Moreover, unusual rainfall in major producing districts of chilli such as Guntur has also delayed the crop harvesting by more than 20-25 days. And this may also reduce the crop productivity by 10-15% in the current season.

Similar trend was also seen in other states as the total production of chilli in Madhya Pradesh is projected at 30 lakh bags against 40 lakh bags reported last year. In Maharashtra and Karnataka , the total production is estimated at 10 and 20 lakh bags , down 50% and 20% respectively.

Prices were also supported by strong export demand. As per latest data release by Spice Board of India , during the April to December period, chilli exports showed a 22% rise in quantity to 1.79 lakh tonnes.

The spot prices of chilli at Guntur mandi added almost Rs. 1000 per quintal in last one week. The chilli 334 quality and teja quality gained Rs. 1000 per quintal to trade at Rs. 9200 and Rs. 9800 per quintal respectively. However, increasing fresh crop arrivals at spot market is likely to create pressure on prices. According to traders, February onwards arrival will further increasing as second picking will be started which might further weigh on prices. But overall looks bullish due to reduced production and low quality new crops.