Onion prices crash 40% on bumper production

Prices likely to remain low, as fresh arrivals of the crop continue till May 2017

Prices of onions have collapsed on the back of two consecutive bumper production years, proving once again that when farmers grow more, they get less.

According to government data, the wholesale modal onion prices at Lasalgaon in Maharashtra, the biggest trading centre for onion in India, dropped between 30-40 per cent after the November note ban.

The cost of production of onion is around Rs 800-900 per quintal, while prices are hovering around Rs 500 per quintal across major wholesale markets.

Onion prices have come down substantially at the retail level as well, during the past one year. Around January-February last year, onion prices were around Rs 20-22 per kg, against Rs 12-14 per kg at present.

The prices are expected to remain low, as fresh arrivals of the crop continue till May 2017. Onion harvest generally takes place between September and May, divided into three seasons-pre-Kharif, Kharif and Rabi.

Notably, around 65 per cent of production is in the Rabi season, under which arrivals begin by April.

Wholesale modal prices of onion at Lasalgaon ranged between Rs 450-500 per quintal in February 2017, against Rs 550-725 per quintal in January 2017. In early Novenber it was around Rs 850.

In 2015-16, onion production was estimated to be around 20.21 million metric tonnes which was 11 per cent higher than the previous year. According to initial estimates by the government in July 2016, onion production in 2016-17 was estimated to be around 19.7 million tonnes, which is six per cent lower than the previous year. Notably, 2016-16 was a bumper onion production year. However, as compared to the past five year's average onion production, production in 2016-17 will still be about five per cent higher than normal.

Increase in onion productivity has been one of the main reasons for rise in production. The average onion productivity increased to 17.32 tonnes per hectare in 2015-16, against 16.13 tonnes per hectare in 2014-15.

According to traders, despite initial estimates of low production compared to last year, the supply is almost the same as last year. "Over the last two years, the onion production is much higher than normal. Like last year, the average arrival is around 125 trucks a day (one truck has a capacity of 10 tonne)," said an onion trader based in Nasik.

Meanwhile, exports of onion too have nearly doubled between April-November 2016. According to data from Apeda (Agricultural and Processed Food Products Export Development Authority), in 2015-16, the total exports of onion between April-November was around 6,07,374 metric tonne, valued at around Rs 1621 crore. This financial year, between April-November 2017, the total exports were around 14,63,552 metric tonne, valued at around Rs 1942 crore.

"The market has seen excessive supply over the last two years, and the demand remains static. As a result, the prices have dropped below the cost of production," said an onion trader from Maharahstra.