China may renew importing Indian chilli as its crop is hit by floods

As floods in parts of China impact production, Indian red chilli exporters expect demand to return from the largest buyer amidst declining stocks in the neighbouring country. As a result, prices, which had retraced from the high levels in May, are seen rebounding in the weeks ahead.

China, the largest buyer of Indian chillies, had made aggressive purchases till May this year and the demand had slowed down in recent months.

Bangla too joins the list

“China’s production in some areas has been affected by 30-40 per cent due to floods and it may renter the market again. With fresh buying coming up from China and also from Bangladesh, we expect prices to go up by ₹10-20 per kg in the coming weeks,” said Sambasiva Rao Velagapudi, Chairman, All India Chilli Exporters Association in Guntur, the largest market-yard for the spices crop.

Rao said chilli stocks in China are down by about 75 per cent. “A month ago, China had 2,000 containers of stocks. Now they are having only 500 containers,” Rao said, adding that the low stocks would trigger renewed demand from the neighbouring buyer.

India’s chilli exports touched a record high in value during 2022-23 fiscal, exceeding ₹10,444 crore, as per Spices Board data. China had purchased over 1.57 lakh tonnes of Indian chillies valued at over ₹3,408 crore in 2022-23, accounting for about a third of the export value. Chilli is the largest produce in India’s spices export basket, accounting for almost a third of the value of overall shipments of ₹31,761 crore.

Current stocks

After hitting a high of ₹220-240 per kg in May, prices of Teja chilli, the pungent variety preferred by Chinese buyers, retraced a bit on slack demand during recent months. Now, prices of Teja chilli are likely to return to the ₹220-245 range, Rao said, adding that another variety Super 10, which has medium pungency, is ruling in the same range. “We are also expecting good demand for Super 10 chilli from Sri Lanka and Malaysia,” Rao said.

India’s current chilli stocks are similar to last year’s levels, Rao said, adding that in Guntur and Andhra stocks are estimated at around 60 lakh bags (of 40-kg each). The current stocks in Telangana are at around 27 lakh bags and 30 lakh bags in Karnataka, he added.

Further, Rao said many people who had bought at high prices during March-May may not want to sell now and wait for better prices till November-December.

“The market (prices) has been subdued in the last few weeks, with the price of chillis (Teja) hovering around ₹24,000 per quintal. We expect the Chinese buyers to come back in the next few weeks in the wake of depleting stocks. If they come back, we expect the prices to go up by ₹2,000-4,000 a quintal,” Rama Rao, a chilli exporter from Khammam, one of the major chilli trading centres in the country, said.

Another exporter, wishining anonymity, said that the Chinese stocked piled chilli by buying big time in May. “If we go by the indications, their stocks plummetated. India being a major chilli producer in the world, we expect them to resume purchases in large quantities in the next few weeks,” he said.

Telangana is ranks fourth in chilli area with 1.55 lakh hectares and second in chilli production with 7.19 lakh tonnes. According to the Prof. Jayashankar Telangana State Agricultural University, the Guntur market, a hub for chilli trade, recorded arrivals of 1.55 lakh tonnes in January-February 2023, against 1.19 lakh tonnes during the same period previous year, showing a growth of 30.66 per cent.