India

Spice update: Chilli glut subdues market, other spice prices suffering

By RJ Whitehead

- Last updated on GMT

© iStock
© iStock
A good chilli crop has been reported for central India after sowing areas increased substantially over last year due to high prices seen earlier in 2016 tempting farmers to cash in. This increase in supply has been causing prices to fall, however, since September last year.

Prices at the Guntur spot market in AP have fallen by over 50%, as a result of increased production and low demand. 

High prices in 2016 made the spice a popular planting crop, with production areas increasing by 35% in the main producing regions of Karnataka, AP and Telangana. 

Chilli1

Farmers also switched to cultivating chilli after adverse weather and fungus impacted cotton and wheat crops in Guntur and Bengal. As a result, overall chilli production is expected to increase by 15-20% during the course of this year. 

Demand from China, where chilli production has recovered since late 2016, has also fallen. However, lower prices seen in the market over the last several weeks are likely to trigger higher demand from elsewhere, which could eventually support prices in the near future. 

Though world pepper​ prices have been falling since 2015 due to increasing supplies, production continues to grow. This year’s forecast of around 460,000 tonnes is up 18% compared to 2016. 

In Vietnam, where the crop is currently being harvested, pepper output is forecast in excess of 190,000 tonnes, up 12% year on year. India, Brazil and Indonesia are also expecting bumper crops in 2017. 

Coriander​ production is set to decline in India this year due to lower plantings seen in Rajasthan, Madhya Pradesh and Gujarat. 

Farmers in these states have moved from the herb, whose seeds add spice to Indian curries, to other more profitable crops such as garlic, cumin and mustard seed. 

However prices in India remain relatively low, pressured by competitive prices for the herb from Eastern Europe. 

Ginger​ prices still remain very low due to higher production and an increase in growing areas in South India. 

This increase in land for ginger production is attributed to heavy planting after the market saw higher prices in 2014. However, with prices currently very low, farmers may leave some of their crop in the fields, limiting ginger supplies in the coming months.

Related topics Markets Supply chain South Asia

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