Fresh arrivals cause further fall in onion price

Prices declined by 30% in past three months on weak demand, higher production

After tomato, farmers are reeling under price fall for onions where the same has decreased by nearly 30 per cent to Rs 7 per kg from 11 a kg in January this year. Farmers and traders alike state that weak exports against higher production has put pressure on onion prices which have reached at two years low levels in recent times.

The recent fall is being attributed to fresh arrivals of onion in the market.

New crop arrivals of onion have begun in the market with daily supply being registered at over 4,000-5,000 tonnes at India's biggest onion market Lasalgaon in Maharashtra, while the same is at about 16,000 tonnes a day across the country. Onion production stood at 18.9 million tonnes in 2014-15 crop year (July-June). In the 2015-16 crop year, production is estimated at 20.6 million tonnes, higher by about nine per cent.

"New season has started and fresh supply of onion has been growing leading to fall in prices. On the other hand, the market is relying only on domestic demand as exports this year seem to be muted, adding further pressure on prices in past few months," said Purshottam Chothani of Nasik based Vishal Exports, an onion merchant.

According to farmers, the fall in price has led to reduction in cost realisation for farmers. Farmers are currently realising roughly 20 per cent less than their cost. As against a production cost of about Rs 70,000 per acre, farmers are realising only about Rs 55,000 per acre.

"At current price level, farmers are losing about Rs 15,000 per acre or 21 per cent of the cost. Farmers had shifted to onion farming on the back of good returns last year and as a result production has gone up this year," said Shri Ram Gadhave, president of Vegetable Growers Association of India.

To worsen things, onion prices are expected to decline further in near future. However, so far farmers have abstained from making any demands for support from state or central government for assistance.

According to traders, arrival of onion may double during April and is likely to go upto over 50,000 tonnes in May this year, thereby further pressurising prices to Rs 6 per kg in wholesale market.

According to exporters, hike in minimum export price (MEP) of onion in 2015 has pulled down export by 10.45 per cent to 695,000 tonnes in April to December period as against 776,000 tonnes in corresponding period last year. Though in December 2015 government removed MEP to push export from India, it failed to boost export demand.

"Last year, government imposed MEP two times to control higher domestic prices which restricted onion exports from India. Fresh export demand may come after mid April and price movement will depend on the demand. If new demand will not come, prices of onion may decline further in April too," said Atul Shah, onion exporter and director of Pipalgaun mandi near Nasik in Maharashtra.

At this time most of the arrival is consumed by stockists and traders who are supplying onion to different parts of India for domestic consumption. Some supply goes to dehydration units in Gujarat.

Bhavnagar based onion trader said, "Currently, most of the stock is being consumed by domestic demand. Buying for export is almost nil. After mid April export demand is likely to gain momentum."