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Product movement in Chinese onion market is speeding up

Gansu enjoyed an abundant onion market last season. Moreover, high shipping fees formed an obstacle for onion export, so that many of the export onions were redirected to the domestic market instead. There was a huge supply volume in the domestic market, while demand remained limited. That is why the price went down. One onion trader from southwest China talked about current conditions in the Chinese onion market.

"Onions from Jianshui in Yunnan recently entered the market, but their supply volume is still small. Most of the onion supply comes from production areas in Gansu, with some supply from cold storage warehouses in north China that was stored during the summer season. The price of red onions was good last year, and many farmers blindly followed the market trend. This year the overall surface area devoted to red onions is much larger than last year. Some of the red onions have already begun to rot or developed other problems with product quality. There is a waste of at least 5%," explained the onion trader.

Red onions from Gansu cost around 0.83 yuan [0.13 USD] per 0.5 kg in production areas. The price of yellow onions is around 0.85 yuan [0.13 USD] per 0.5 kg. The price of white onions is around 0.35 yuan [0.06 USD] per 0.5 kg. The onion trader, who has stalls in Guiyang Market, Kunming Market, and Chengdu Market, also commented on regional prices. "The market price of onions in southwest China is around 0.9 yuan [0.14 USD] per 0.5 kg. That is o.4 yuan [0.06 USD] per 0.5 kg less than the price of 1.3 yuan [0.20 USD] per 0.5 kg half a month ago."

The supply volume from production areas is rather large at the moment, and traders with stock in storage as well as farmers all eagerly cleared their storage prior to New Year's. According to the onion trader, "product movement in the domestic onion market quickened in the period leading up to the end of the year, but the pandemic still restricts the market. The current sales volume is only one third of the sales volume in the same period last year."

"Shipping fees are still high. Many onion exporters have temporarily halted onion export. Only small volumes are exported to Vietnam and Russia," explained the onion trader. There are three reasons for the price increase. First, the overall surface area devoted to onion plantation has decreased compared to last season. Domestic market demand has recently been quite strong, and so the ratio of domestic sales has increased. Second, the product quality of onions has been less than ideal this season. A smaller ratio of the production volume was suitable for the commercial market. The price of top-quality onions therefore increased. Third, in addition to high shipping costs and rising onion prices, the relative price further rose due to the appreciation of the Chinese yuan. As a result, overseas demand has severely weakened and the order volume is very small.

"In the end, domestic market demand for onions is huge. The Chinese market is able to absorb most of the onions that were redirected from the export market. However, many exporters lack appropriate retail channels in the domestic market. And when they sell their onions in the domestic market, and they receive new orders, their only option is to purchase onions again from traders with stock in storage facilities," explained the onion trader.

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