Traders, exchange sort out chilli delivery row
Red chilli traders, who have been going through delivery problems, can expect some respite. Officials from the NCDEX met with traders in Guntur on Thursday to settle differences over the quality of deliverable chillies causing a price disparity be...
By Deepa Krishnan, TNN |
MUMBAI: Red chilli traders, who have been going through delivery problems, can expect some respite. Officials from the National Commodities and Derivatives Exchange of India (NCDEX) met with traders in Guntur on Thursday to settle differences over the quality of deliverable chillies causing a price disparity between the physical and the futures market.
According to a source, NCDEX officials met with 25 prominent traders and concluded that about 2,000 tonne of the total stock of 9,500 tonne in the godowns in Guntur were not fit for delivery. Further, the quality standards of the chillies that would be accepted for deliveries, was re-evaluated. It was also decided that two representatives of NCDEX would be stationed at Guntur to monitor trading till the delivery issues were solved.
The major season for chilli arrivals begins in early February and goes on till June. This is extended a few months up to October when the arrivals are much lower. This season, many physical traders claimed that some market participants were able to procure false lab reports and were pushing lower quality of chillies into the market.
This caused a considerable distortion in prices, leading to backwardation. This is a situation where the futures price of a commodity trades at a much lower price than the actual price in the physical market. The price of one quintal of chilli deliverable in November on NCDEX closed at Rs 4,915 on Thursday, down from Rs 4,985 on Wednesday.
In comparison, the spot price in Guntur closed at Rs 6,599 per quintal on Thursday. This was because the arrivals are tapering in the market. Currently, all arrivals are from the cold storages. Around 4-5 trucks of 10 tonne each are arriving into the Guntur market everyday.
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Further, sources indicated that due to heavy rains in Guntur over the past few days, the chilli sown in and around the area could be affected. This may have an impact on the early arrivals in the forthcoming season, beginning February ’07. “However, it would be too early to determine the extent of the problems,” they said.In the just concluded season, the total production of red chillies was roughly 8.5 lakh tonne, almost 40% lower than the yearly average. This was the initial cause of the ballooning price.
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