Onion hits the bottom on subdued demand

Average onion price in August plunged by over 40% from the corresponding month previous year

Onion price have fallen dramatically this month owing to poor offtake from domestic bulk consumers and overseas importers. Such a fall during the peak-demand festive season is unusual.

Onion’s average price dropped a staggering 44 per cent to Rs 10 a kg on Friday from Rs 18 a kg early this month in Hyderabad mandi. In the benchmark, Lasalgaon market, too, onion nose-dived by 24 per cent to Rs 12 a kg now after hitting a low of Rs 11.50 a kg on Thursday. The politically-sensitive commodity is selling at Rs 13 a kg in Mumbai and Rs 16.29 a kg in Delhi compared to their respective levels of Rs 19 a kg and Rs 17.36 a kg on September 1.

Data compiled by Noida-based Indian Agribusiness Systems, popularly known as Agriwatch for Small Farmers’ Agribusiness Consortium (SAFC), showed an average onion price decline of 17 per cent in Pimpalgaon, Asia’s largest spot onion selling market yard. Average onion price in August plunged 40 per cent from the corresponding month in the previous year.

“Onion price has bottomed out. I don’t think farmers would allow the price to fall further. Supply may be controlled in case arrivals go up. Therefore, onion is unlikely to fall further,” said R P Gupta, director of Nashik-based National Horticultural Research and Development Foundation.

Consumers, however, continued to cough up Rs 24-26 for a kg of onion in and around Mumbai. Onion price has reached the pre-crisis level in June when delayed monsoon rainfalls threatened its sowing this kharif season. Although sowing started with a delay of a month, resulting in proportionate delay in harvesting, its price remained low thanks to government intervention.

When onion price started soaring towards June-end and hit Rs 40-44 a kg in the wholesale mandis and Rs 60 in retail markets, the government brought the commodity under the Essential Commodity Act. The Act restricts farmers and stockists to hold beyond a justifiable quantity. Also, the government threatened hoarders with stern action in case of violation of this Act. Consequently, farmers started releasing onion gradually. Also, they did not preserve the vegetable supplement for future sale. Rainfalls during the season damaged the stockpile with huge moisture content.

“Stored onion got wet in the monsoon rainfalls, which has reduced its shelf life. Also, exporters are staying away from fresh purchases due to huge spoilage potential. Feared with high price rise, overseas importers had booked orders from alternate suppliers including China and Pakistan. Hence, onion exports from India have come to a grinding halt,” said Ajit Shah, president, Horticulture Exporters’ Association.

Meanwhile, harvesting of kharif onion has started in the south. Because of the delay in the rainfalls, harvesting in Maharashtra will commence by October-end or early November. Until then, exporters will remain away from fresh purchases, said Shah.

Total area under onion crop is estimated to have risen significantly this year. SFAC data showed a 39 per cent rise in sowing area in Karnataka to 110,374 hectares as of September 4 this season against 79,264 hectares by the same date last year.

By contrast, area under kharif onion crop in Maharashtra has declined to 49,155 hectares so far this year, compared to 56,533 hectares in the previous year.

Total onion production in kharif season, therefore, is estimated to be 4.5-5 million tonnes. Last year, India’s overall onion output was 19.5 million tonnes.

Shah forecasts India’s onion exports this year at less than one million tonnes, compared with last year’s 1.4 million tonnes.