Onion market shortage drives up prices India, Brazil and Argentina

Smaller sizes, shortages and reasonably optimistic expectations for the new season, that's the global onion market in a nutshell. In Europe and the United States, dry weather and high temperatures result in smaller onions of good quality. Germany, France and Spain are among the countries facing these problems. Dutch exporters are preparing for the moment when Senegal opens its borders. The West African country is an important export destination. In Latin America, there are shortages on the market. The harvest in Argentina and Chile turned out lower, and demand is high, as are the prices. Brazil showed increases up to 172%. Peru profits from the situation, but the quickly rising demand from surrounding countries causes shortages in the domestic market. In India, prices have also increased rapidly, suspiciously so, according to the government. The country imports a lot from surrounding countries like Pakistan, Afghanistan and China. China does a lot of business with ASEAN member states. In Australia, the Queensland season starts in about five weeks. This market often has oversupply, the growers in Queensland have adapted their season to the cultivation in Southern Australia. The sector is worried about the effect of imported onions on the sector though, and is trying to convince retailers to choose Australian produce only.

Production in Argentina and Chile decreases year on year, influenced by higher production costs. Growing wage and transport costs pose the biggest challenge for the growers. The euro/dollar exchange rate influences the export opportunities to Europe.

Prices for Argentine onions have risen sharply. Up to 45 pesos (4.30 euros) per kilo are paid. This upward trend was started halfway through this year. The cause is heavy rainfall in production areas like Rio Negro, Buenos Aires and Santiago del Estero, before the harvest was brought in. This caused shortages, which drove up the price. The Argentine government called on the population to consume fewer onions, a decreasing trend would cause the price to go down. The situation is expected to become stable again when the Santiago del Estero region enters the market. Until then, there will be import from countries like New Zealand and Brazil to keep prices under control.

Prices in Brazil increased sharply. In the first seven months of this year, onions became 155% more expensive, according to IBGE. In Ceasa in Londrina, even higher increases were noted. While a crate with 20 kilos of onions yielded 33 Brazilian reals (8.46 euros) in January, in July the price tag showed 90 reals (23 euros), a 172% increase. Main cause for the increasing prices are climatological circumstances that harmed the harvest in Brazil and Argentina. According to Carlos Alberto Salvador of the Secretariat of State for Agriculture and Supply (Seab), Brazil produces 1.6 million tonnes this year, and another 1.4 million tonnes are imported. Due to the disappointing harvest in Argentina, Europe is an major supplier.

A second factor is that prices for many agricultural products were too low, an economist says. That discouraged growers to cultivate those products, slowing down supplies. A final factor that plays a part is the exchange rate.

Peru has a large cultivation of sweet onions. Traditionally, these onions mostly find their way to the United States and European markets like the Netherlands, Spain, Italy and Germany. Export to the British market is more difficult. Usually, export to neighbouring countries in Latin America is low, but that's different this year. Colombia and Panama do buy some onions, but this year large markets like Brazil and Chile are also looking for onions. The harvest in Chile and Brazil turns out lower, influenced by El Niño. Chile had cold weather, the harvest turned out lower in Peru as well. A good thing about the weather phenomenon, however, is that the quality is exceptionally good. The coastal regions of Peru have a mild climate, making year-round cultivation possible. Toward December, the temperature rises, which can cause shortages. An uncertain factor is how big the effect of El Niño will be. For Peru, more rainfall and higher temperatures are expected in the coastal region. In the highlands, they're also reckoning with more rainfall, which will cause water levels in the rivers to rise. Technological developments are followed closely, and optical sorting is also being considered. This way, Peru wants to keep meeting consumer demand, with labour costs being stable.

From the Southern Chinese city Pingxiang Port, near the border with Vietnam, onions are exported within ASEAN, the Asian Economic Union. Early this month, the city reported export contracts for a total volume of 550,000 tonnes of yellow onions. Annually, the province exports 840,000 tonnes to ASEAN member states, which means these markets account for 70% of the total onion export of the Chinese province. The current export season is going well, prices fluctuate around 3000 yuan (420 euros) per tonne.

At the end of July, business in India was concerned about increasing onion prices, which is why onions were stocked up across the country. Most of the onions are stored in the Maharashtra, Gujarat, Madhya Pradesh, Rajasthan and Bihar regions. In the region of Maharashtra, teams were deployed last week to track down 'hoarders'. Experts of Lasalgaon APMC, the largest Asian onion market, say that the current price fluctuations aren't caused by natural changes. The price difference between the wholesale market and retail prices was around 30% last week, according to experts there's a high chance of prices being driven up by hoarding traders. Over July, price increases are reported of up to 70%.

In terms of quality, there are concerns as well. Reports say the high quality onions in storage were mixed with low quality onions. About 15 to 20% of the onions in storage have been sold. In addition, growers hold on to their onions longer, increasing the price. Experts say the price will remain high until the start of the new season, expected in October. In September, the first new harvest will enter the market from the Karnataka region. The government reportedly created a 10,000 tonne stockpile. How these onions will be distributed is still unknown. The harvest amounted to 18.9 million tonnes in 2014/2015. A large part of the harvest was damaged, however, by rain and hail, in February and April. Countries including Egypt, Pakistan and China are looking at export opportunities on the Indian market. Afghanistan also sees opportunities. Onions from Kabul are available at Indian wholesale markets for 15-25 rupees (0.20-0.33 euros) a kilo. The harvest in Mazar-i-Sharif is about to start, with good prospects.

"Down under", the harvest season is about to begin. The first onions from the north are expected in the next 5 or 6 weeks. The prospects are good, the sector expects a total volume of 256,000 tonnes. An uncertain factor is the onion thrips and the drought, which may still influence the harvest. If no rain will fall in Queensland, the growers will have to seriously irrigate.

Some new varieties have also been introduced, including an early variety of the Lucinda. A number of growers are testing the new variety, which doesn't have an official name yet. A new 'sweet pink' can also be found on store shelves.

While the harvest in Queensland previously started in August/September, the start has been moved to October. Higher volumes and better storage capacity in the south of Australia forced the Northern growers to adjust the season to prevent a surplus. The prices on the market are disappointing. Despite the efforts, there is often oversupply.

The sector is worried about the influence of imported onions on the market, especially in the run-up to the new season. For this reason, talks are held with supermarket chains to convince them to opt for Australian onions.

In the Turkish region of Polatli, Ankara, the onion harvest started this week. The region has the largest onion harvest of the country. The mood among growers is optimistic, the acreage is about 800 hectares smaller than last year. Still, a better harvest is expected thanks to the good rainfall. The prices for the early onions are around €0.15 and €0.17 per kilo.

Europe
Several countries in Europe have been facing drought these past months. That also influences the cultivation of onions. Although more onions were planted in the Netherlands, the percentage of onions that came up is disappointing so far. That doesn't just go for the Dutch growers, there are also significantly fewer onions in Spain and France, and in the Balkans the growers are also facing drought.

The Netherlands is among the top countries when it comes to exporting onions. The past season, over a million tonnes were shipped. The biggest buyer of the Dutch onions is Senegal, but in all the small Western European country exports to about 100 countries all over the world. In recent years, Panama and Indonesia have become major export markets. Russia was a big market, until the country closed its borders in August last year. Still, it turned out well for the export, partly thanks to a shortage in Brazil, which the Dutch trade responded to.

The past years, Dutch growers faced quality problems, but last season the quality provided a ray of hope. At the moment, the Dutch exporters are waiting for the Senegalese market to open. Every year, the West African country closes its borders to protect domestic growers, and traditionally the borders are opened around September 1.

The first weeks, the export of onion sets wasn't very good. Important buyers are Germany, England, Scandinavia, Malaysia, Panama and Brazil. Mid-August, the export really got going. In the coming weeks, the seed onion season will start. It's uncertain yet whether this season will connect well to the onion set season. The competition in the Netherlands is particularly found among the sorting companies, that want to fill a joint capacity of 35,000 tonnes every week. The growers have shown themselves to be very determined to sell the onions, and they often get the long end of the stick. Optical sorting is not very popular yet in the Netherlands. Although the first lines have been installed, the introduction wasn't without fault. So there is some scepticism among packing stations on the investment in these machines, although everyone in the sector is convinced that optical sorting is the future, and will change the sector.

The weather conditions in Germany, little rain and a cool spring, have a negative impact on the harvest. An average harvest is expected, possibly a bit below average. The onion size turns out too small, which traders and growers are disappointed about. Nevertheless, the quality of the onions is good. Demand was low due to the holiday period, and now that's coming to an end, demand is increasing again.

Prices in Spain started out low, partly due to the historically bad result of the storage onion season. From the end of April onwards, the prices recovered, partly because Brazil imported more onions. In general, the traders are satisfied with the pricing.

The weather impacts sizes this year. A high temperature and hailstorms resulted in small sizes. That provided an advantage for export to Latin American markets, where the small sizes are popular. Soon, the season for storage onions will start, also with problems surrounding sizing, depending on the grower and the region. Thanks to the good quality, the country is able to store more onions in cold stores. The Russian boycott, a Spanish exporter says, has little impact, because the Russians are growing a lot of onions themselves, and mainly import from neighbouring countries.

The shallot harvest in Brittany turns out 15% lower than before. The main cause for it is that less was planted during the dry spring. Due to the drought, the sizes are turning out smaller. In addition, the market was very disappointing last year, which caused fewer growers to plant shallots. This causes relatively high demand, resulting in little competition on this market.

For other regions in France, a similar view applies as to Brittany. The weather in July was bad, and the onion harvest is generally disappointing. For the seed shallots, a similar scenario is expects, with fewer of these shallots sown in France.

For the prices, this means an upward trend, not just for the shallots, but also for the normal onions, especially the larger sizes. Due to the weather conditions, the onions turn out smaller. Many growers are trying to supply the small onions to industry, others are forced to throw away the harvest.

The onion season in the United States is roughly two weeks ahead. Dry and warm weather brought the harvest forward in the Pacific Northwest. The yellow onion harvest started in particular, the red and white onions still have a few weeks until the season gets started. The sizes are smaller, and although the prices are good, $13-15 for 50-pound bale, the market is slow.

Every week, FreshPlaza publishes an overview of the market situation of a product in a worldwide context. With these articles, we're aiming to give an idea of a global market that's becoming ever smaller as a result of globalization. Next week, the spotlight is on oranges.