What will the onion trade look like in ten years?

Sometimes it’s difficult to look even a few weeks ahead, never mind a few months. Yet we asked some players in the onion sector to look ahead ten years. Do all traders, exporting and service packers, agents and growers have a right to exist? Which development will have the most influence on the Dutch onion sector in the next ten years? It might be like reading tea leaves, but it’s interesting to find out how onion traders and processors see the future.

“Between 30 and 40 sorters are currently still active in the Netherlands. I expect ten large and ten small sorting companies will be left in ten years,” says Wim Waterman of Waterman Onions from Emmeloord. “This will be a natural process, some companies will go out of business because they won’t have a successor. It’s very important to take care of the succession, and to know where the ambitions of the next generation lie. After all, no one helped us when we got started either, but we could make a difference by having a clear vision and strategy.”

“There’s not much of a future for agents, trade is done directly increasingly often. As long as there are sorters who don’t export, we’ll also need traders, they maintain each other. However, their number will decrease, and the ones who remain will get larger and larger,” Wim expects. Will Waterman remain one of those? “That’s the plan. But it’s a top-class sport, and you can only succeed if you continue to innovate. Everything has to be just right, not just the sorting, but also your logistics, buying and selling. It’s about the total package. We’re now one of the largest players, but we don’t need to be number one. It’s fine if someone else is number one, that means we can chase them. That’s a better position than being the one that’s chased.”

Wim rules out the chance of new players coming into being. “That seems impossible to me. We’re now on a displacement market with very small margins. You’d have to be very rich to start over, or you’d have to be able to make a difference because of the invention of a machine manufacturer.” Yet Waterman is quite passive when it comes to the current optical sorting developments. “I’ve not yet seen a machine that makes a difference, or that can do much more than a traditional machine or some workers. Current machines seem promising at first, but with current projects, we’ve seen capacity decreasing due to contamination and wear and tear. I’m talking about the American projects, for example, where they work with a more uniform and cleaner product than we in the Netherlands are used to. Once an optical sorter is successful, it will cause quite a stir in the branch, but I don’t see that happening anytime soon.”

What are some of the other developments that will be of influence in the next ten years? “Climate change is very current. I’ve just come from South America, and climate extremes are of the order of the day there. Production areas are turning into deserts and vice versa. That might be to our advantage, but we also have problems with onion fields that are flooded in the Netherlands. Besides varieties and storage methods, we haven’t managed to grow a qualitatively better onion in 25 years, we actually grew one of poorer quality. People are sometimes ashamed of the quality of Dutch onions in general, and I think that’s worrisome. We therefore select the best batches in order to be able to supply a good quality. If we continue to do that, we’ll have a great starting point. After all, we always win regarding logistics, that’s to our advantage. That’s why I definitely feel positive about us and the remaining parties in the Dutch onion sector,” Wim concludes.

“The onion market will become very interesting in coming years. Quality will decide who can make a difference,” confirms Lindert Moerdijk of MSP Onions. “It isn’t important how many sorters will remain. It’s important what they do to improve quality. A major shift is to be expected on the playing field of supermarkets. Stability is important for all processors, and will make a difference in quality.”

“Traders will always exist and are wonderful companies that have become very good in the fickle onion trade. I expect traders will start seeing onions as a by-product rather than a main product, because the larger import accounts are wanted by the larger self-exporting packers,” Lindert continues. “We can only hope all onion processors realise the growers are incredibly important, and that we as a sector should be striving for as high a price as possible. One certainty is that the global population is growing in places that import Dutch onions, so we’ll have plenty of opportunities.”

When asked about the largest developments for the coming ten years, Lindert answers the requirements of international buyers will decide the market in coming years. “Strong, firm varieties and larger sizes will become the trend. Production, storage and processing methods in particular will have to be adjusted to the customer’s wishes. Quality is much more important than just more kilograms per hectare or packing an additional container per day.”

Eric Moerdijk of Monie expects there will still be room on the market for all current links in the onion supply chain. “Traders will continue to exist because they can often offer a complete package, and this will remain a condition for some customers. In recent years, more and more packing exporters have come into existence, but they will also have to deal with this. Large processors have become larger in recent years, and that’s partly the reason why differences between the ‘big boys’ and ‘small players’ have become more pronounced. I think there will be room for both on the market, although I expect more specialisations among processors as well. We’re now dealing with a considerable overcapacity for processors. The question is therefore if continuing to expand as a sector is feasible in the long term.”

“The maximum available area for onions has mostly been reached now in my opinion, and if we as a country want to continue to be distinctive regarding quality, we’ll have to respect this. Perhaps something can be gained in yield per hectare due to improvements of varieties in coming years, but this is often a long process because improving seeds takes time. Of course, it’s possible more foreign onions will be processed in the Netherlands as well, and that the Netherlands will function as a sort of turn-table in the onion supply chain,” Eric continues.

“I also expect agents to continue playing their part, although I personally think it’s an advantage to work with my own buyers for the largest part. That way, it’s easier to build a permanent relationship with growers, and as a processor you have a better view of the crop and the market during the entire (growing) season. That way, it’s easier to give guidance because you’re also providing advise. Production is the basis, and if that’s good, you’ll have a better export product at your disposal as well.”

Eric expects more permanent supply chains will come into existence in future. “This also started happening in recent years. Although a ‘free market’ is great for onions, a permanent supply chain also has it’s benefits, because you can produce more oriented on the market that way, I think, and this is important for the entire supply chain in the long run. There is a trend, particularly in Europe, that more and more attention is being paid to ‘local’ product. However, the question is how common this will become, or whether it will remain a niche. The expansion of production in other countries largely depends on the prices on the global market. In the Netherlands, we can produce and process at a relatively low cost price per kilogram. Because of this, we can be a major competitor for local growers.”

When asked which development will have the most influence on the Dutch onion sector in the next ten years, the packer answers: “Optical sorting will definitely continue to be in development, and in future, this might even become standard. However, it’s now still difficult to guess whether it will have an added value for the entire market, or whether it will remain a niche. Climate change definitely has influence on agriculture, but ‘fortunately’ this is a global problem, and therefore also offers opportunities for the Netherlands if harvests are lost elsewhere on the planet. Perhaps improvement techniques can become quicker in future, so that even more can be gained in this field in a shorter term.”

“Shortening the supply chain has always been a trend. In 1980, I was the first packer to start his own exporting, and other packers gradually started to follow my example,” says Jaap Wiskerke of Wiskerke Onions. “That decision was the right one for us, but who am I to say traders or sorting companies who don’t export have no right to exist. I just wouldn’t want to be in their shoes. Over the years, some trading companies have been offered to me to take over, but what would you be buying? Just a list of names. I think that supply chains will continue to become shorter. Supermarkets prefer being as close to production as possible, and they would probably prefer growing their own products. It’s an added advantage that this isn’t an option in onions because of the necessary crop rotation.”

“For example, now that there are many batches of poorer quality on the market, every sorter is offering their poorer batches to traders, even batches of Class III and lower. Our policy is that we just don’t buy these batches. But a trader doesn’t always have alternatives,” Jaap says. “We have a strategy of a maximum of one retail and wholesale customer per country. At the time that we provide these customers with qualitatively distinctive onions, we often experience a beautiful, mutual growth. Besides, we naturally try to get the best bits, but each market has its own specifications.”

The biggest threat for the coming ten years, according to Jaap, is the phenomenon that export destinations are lifting blockades. “The tricky thing is that all production countries within Europe are also competing with each other. That’s why I see opportunities mostly in destinations further away. Take, Africa, for instance, where the WHO expects a doubled number of inhabitants in 2050. I think this will be a gigantic market for us. They don’t have their own options to expand production. This will continue to be short-day onions, and countries near the equator are too humid.”

Jaap isn’t expecting any revolutionary developments in the next ten years. “Techniques will undoubtedly be improved, but I think developments in the field of optical sorting are still going too slowly now. It’s not as if this technique can be turned on by the switch of a button. Climate change has much influence on our trade, but that has been the case for many years now. We’re now in a late year, and many European countries haven’t sown yet, but in 1983 we also had a late year, but when this was followed by an extreme drought, we had the most expensive year I ever experienced.”

Martijn van Damme of Dacomex expects the onion supply chain will experience the necessary changes in coming years. “While traders in the past had the expertise of local markets and export documentation, this has now become a matter of course for exporting sorters. The position of traders has changed because of this. They do more and more with the ancillary matters nowadays, onions form the basis of this, but a profit can’t be made with them. The latter is what makes it so difficult. In order to play a significant part on overseas markets – with bad payment morals and other risks – the current export margins are small. This is why traders are facing a dilemma: choosing a lower price on the purchasing side of things often resulting in poorer quality, or ignoring the onion trade. In this regard, I see the role of the trader disappearing in coming years.”

“All in all, the tendency of shortening supply chains will continue due to this, and more sorters will choose to do their own exporting. For them, this situation has also become increasingly tricky. The role of agents is another point of discussion. On the one hand, the sorters need them to couple as much supply as possible to demand, but on the other hand, interests are sometimes (too) far removed from one another, which often makes a trade more difficult. Primary information is crucial to sorters, because quality and availability require ever more precision. After all, the supply chain has to be served quicker and quicker, and rapid switching is therefore necessary. We’re personally also seeing a major change regarding the provision of services. Customers want to work more and more based on a delivery programme, and quality, information and speed are sometimes more important than price. Customers want to be de-burdened, and real-time information and care are crucial in this.Supply chain management is therefore increasingly important, which is why a continued consolidation will take place in the next ten years,” Martijn continues.

The exporting sorter expects competition from alternative production areas will become the main opponent in the next ten years. “Productivity increases can already gradually be seen in many sales areas, and this will take flight in coming years. European companies, including Dutch seed companies, are very active in regions such as West Africa and South America to professionalise the local onion production (in part thanks to efforts of European subsidy arrangements). These are worrisome developments for the Dutch onion sector in general. For example, we’ve noticed the import seasons per country are becoming shorter to protect the local production. Qualitatively, the onions grown locally are becoming better, and many investments are made in storage facilities. This will result in the Dutch onion sector having to do more to guarantee its competitive position. Think, for instance, of better supply chain traceability, more efficient processing and better quality. This last aspect in particular is of great importance, because the differences between locally grown onions and Dutch onions will become ever smaller.”

“That also one of the reasons I notice a change in the way onions are grown in the Netherlands. While most of the onions are now grown for the free market and the farmers sell their onions if they receive a fair price, people in future will grow based on programmes in cooperation with sorters more. The major advantage is that onions are grown for a certain destination or sales period. Because of this, parties can choose the right variety regarding storage-ability and sales market. Onions are now often marketed too forcibly because quality isn’t sufficient to store the onions for longer periods. New sorting techniques can be an addition in the field of efficiency, quality and a better use of residual flows, although these will require different operational management. The question is when the technique will be sufficiently developed to use and be profitable for the entire branch. A decrease in the cost price per kilogram is required for this,” Martijn concludes.

Trader Gerard Hoekman of Mulder Onions predicts seven developments that will play a major part in the next few years, firstly in the field of seed improvement. “The Netherlands exports to many countries, destinations that produce no or few onions, or only in certain periods. Developing seeds could change this. Seeds that can be cultivated in these areas, while that’s impossible now. Seeds that will have higher yields per hectare, or seeds more disease resistant, or can even be genetically manipulated. All of these aspects can influence a need, and therefore the amount that has to be imported.”

Climate will also have an influence, according to Gerard. “We’re seeing the weather becoming more extreme all over the world. Longer hot periods, or more extreme rain. It’s very possible this trend will continue, and that it will therefore have an influence on production. This could be both here in the Netherlands and in other production regions. Due to the changing climate, disease pressure could increase, which could influence storage-ability and how long the product can be in transit.”

Competition from production in other countries, nearer or in current sales countries, will result in less demand for Dutch onions, according to Gerard. “Russia, for example, was traditionally a good buyer, but in part thanks to the ban, they’re now self-supporting, and they now also buy product from neighbouring countries. The protectionist attitude of self-producing countries to protect their own production and farmers, such as Central America and Africa, could also result in more competition.”

Besides, competition also plays its part in another field. Gerard: “Selling know-how has been happening for quite some time. In many countries, we first teach a child to crawl, then to walk and finally to run. This is a normal development, but the challenge posed by this sale is significant. That’s also trade, and sooner or later this will start causing problems. Many countries are trying to attract companies (with know-how) to set up, or improve, production in their countries. Many projects are taking place globally, not just in the field of onions, but also for tomatoes, flowers and vegetables. Support from the EEG and development cooperation from the Dutch government are also types of actions in other countries.”

“New technologies will also be introduced in coming years,” Gerard expects. “The optical sorter, for example, but also more modern, computer-driven storage sheds, modern sowing and harvesting machines, the use of drones and similar. The question is whether a better product or a larger yield is more useful. I’d put my money on a better product. If we can manage that, it would soon result in more net kilograms, so a larger yield per hectare wouldn’t be necessary. A better qualitative product will increase our competition.”

“The growing global population also leads to an increase in product necessity. Traditionally, onions are a basic necessity in many cultures. There will be additional demand because of this. If this demand will be covered by the Netherlands remains to be seen. The Netherlands will have to fight hard to retain its number one position as largest global exporter. We’ll have to cooperate intensely and improvements will have to be made in many fields, particularly regarding quality. I think we should be dedicated to quality and not quantity in future. Cooperation from seed to final destination, with each other rather than against each other,” Gerard concludes.