A rise in onion production in ‘non-traditional’ States and higher output during the Kharif season have resulted in onion prices ruling at a four-year low currently.
“Kharif onion production is higher this year. Inter-state trade has been slack, on the other hand,” said Yogesh Thorat, Chairman, Maharashtra Farmers Producer Company Ltd.
“This year, onion production is higher everywhere — Maharashtra, Gujarat, Madhya Pradesh, Karnataka and Uttar Pradesh,” said M Madan Prakash, President, Agri Commodities Exporters Association (ACEA).
Lower than production costs
“There is the pressure of arrivals. Also, demand is less in Maharashtra since production in other States such as West Bengal and Madhya Pradesh is higher,” said Ajith Shah, President, Horticulture Produce Exporters Association (HCEA).
“Demand is slack in Maharashtra in view of a higher crop in other States. Prices are lower than the cost of production, which is a source of worry,” said Vikas Chaudhary, a Nashik-based onion trader-cum-exporter.
Currently, the modal price (rates at which most trades take place) of onion is ₹675-700 a quintal at Lasalgoan Agricultural Produce Marketing Committee (APMC) yard, Asia’s largest onion market. The price is compared with ₹2,480 a year ago and ₹3,801 in 2021. Even in 2020, prices were higher at ₹2,020.
The current onion price trend is probably a vindication of the Centre’s policy to make onion production sustainable by encouraging ‘non-traditional’ States to grow the horticulture crop more.
UP, a surprise packet
It was envisaged as a measure to ensure exports did not suffer from ad hoc measures such as a sudden ban on exports. In 2020 and 2021, the Centre banned onion exports as retail prices soared to ₹100 a kg after the crop was affected by unseasonal rains.
“Production in other States is gaining. Despite rabi arrivals being a month away, the Kharif crop is still arriving,” said Thorat.
Rabi production is also estimated to be good. Since 2019, the Centre has been trying to make the country a surplus in onion by expanding the cultivation area in non-traditional States. The Centre’s view was such a move will ensure stable prices throughout the year.
Madhya Pradesh was the initial target for increasing onion production but Uttar Pradesh has been the surprise packet with arrivals from rising significantly over the last couple of years (see table for arrivals this month). Gujarat, too, has increased its production.
“Interest in buying Kharif onion is less because its shelf life is limited. Rabi onion can last longer,” said Chaudhary.
Export demand
The current low price has resulted in export demand for onion from Gulf countries, Malaysia and Sri Lanka.
“We have become more competitive now with standard-size onions being offered at $250-260 a tonne,” said ACEA’s Prakash.
Pickles or small onions are in demand too from countries such as Malaysia, which is buying them at $180-levels. “Lower freight rate is another factor boosting exports,” he said.
“Our problem on the export front is that the ban in 2020 and 2021 has forced importing nations to begin growing onion. Bangladesh, for example, was buying 30,000-40,000 tonnes annually. This has now got reduced to 15,000-20,000 tonnes,” said HCEA’s Shah.
However, demand is good from Gulf nations, Iraq and Sri Lanka, he said. Chaudhary concurred with the view.
While details of onion production during the current crop year are awaited, in 2021-22 its production increased to 31.7 million tonnes from 31.13 million tonnes in 2020-21.
The higher production was despite a drop in the area under cultivation to 22 lakh hectares from 22.08 lakh hectares.
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