Over the past few days, chilli prices in major production areas have dropped by 0.3-0.5 yuan per half a kilo and haven’t stopped dropping yet. What is causing chilli prices to continue to fall? Jinxiang is usually the first area to produce a new crop each year, but as a result of serious floods, this year was an exception. Volumes from Jinxiang, a leading production area, have gradually increased since October 15 after the continuous rains had stopped.
The most notable fact this year is that the new crop from Jinxiang became available one week earlier than last year, and the quality and yield of products, unaffected by the floods, are up from last year. Growers are happy with current prices and are actively marketing their crop. However, the main purchasing force is the wholesale market traders, while Chinese processing plants and storage chilli traders, the other two major purchasing forces, are still waiting for market developments; only a few traders are making purchases to fulfil rigid demand.
As the Chinese wholesale market alone is not able to absorb the increased volume of new crop in a short period of time, over the past few days, the supply from Jinxiang has exceeded demand, and prices are falling slightly. The new crops from Jinxiang are flooding onto the market and with growers willing to market their products, the supply is to continue to increase.