Onion jumps 30% to hit a two-week high as export curbs are lifted

Exporters resume business immediately after Paswan's Wednesday tweet announcing the decision

Onion prices rose by as much as 30 per cent on Thursday to hit a two-week high, following a sharp increase in demand brought on by the government’s decision to lift a six-month old export ban.

In the benchmark Lasalgaon Agricultural Produce Market Committee (APMC) mandi, the model onion price shot up to trade at Rs 21.50 a kg from Rs 16.50 the previous day. This price level was not seen after February 11. 

Exporters resumed business immediately after the Union Food Minister Ram Vilas Paswan tweeted late Wednesday evening announcing the withdrawal of the onion export ban.

“Since onion prices have stabilised and a bumper rabi crop is expected, the government has decided to lift ban on exports. Monthly harvest of the vegetable is pegged at 4 million tonnes in March this year, up from 2.8 million tonnes in the corresponding month last year,” said Paswan in a tweet on Wednesday.

Trade sources believe that the decision on lifting the export ban was taken after a high-level meeting of Group of Ministers on Wednesday, which also discussed reducing the minimum export price (MEP) of $850 a tonne.

Both decisions (export ban and MEP) were taken about six months ago when wholsesale onion prices shot up to Rs 80 a kg, taking the retail rate to Rs 140-160. The sharp rise waa largely due to massive kharif crop damage caused by devastating floods in major growing states such as Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Madhya Pradesh.

However, lifting the ban would be effective only after the Directorate General of Foreign Trade (DGFT) issues a notification in this regard.

“Exporters have started booking onion in large quantity for future shipments. Despite huge arrivals, prices have shot up today only on increased demand from exporters following the lifting of the export ban,” said Narendra Savaliram Wadhavane, Secretary, Agricultural Produce Market Committee (APMC), Lasalgaon, Asia’s largest onion wholesale mandi.

Interestingly, onion arrivals in Lasalgaon were reported at 1,500 tonnes on Thursday as compared to 1,000 tonnes a day earlier. 

Wadhavane, however, believes this price level is unsustainable. “Currently, onion arriving at mandis is of late kharif season and cannot be stored for long due to its short shelf life. Hence, traders need to sell it within a couple of days of its purchase,” he added.

Normally, traders and stockists start building their inventories with very small quantities of the rabi season crop, which has begun arriving at the mandi. Rabi season crop is set to start in full swing two weeks from now which may see onion prices decline further.

Meanwhile, the stock limit of 5 tonnes for retailers and 25 tonnes for wholesalers, imposed by the Maharashtra government in December, has irked traders and stockists. 

“The state government has already initiated a process to ease onion stock limit. Lifting of stock limit would provide a breather for traders especially for exporters and stockists,” said Deodatta Jaywantrao Nikam, Chairman, APMC (Ambegaon, Pune).

Despite early sown kharif crop having been washed away in the floods, farmers planted onion twice and thrice in some areas, due to which there was a spike in the cost of cultivation. Hence, the current onion price is remunerative for farmers, said Sanjay Sanap, a Nashik-based farmer and trader.