Onion prices to rise on crop damage, stock building

Onion prices are likely to start rising in two-three weeks, when the rabi crop hits mandis. This is because groups of traders and stockists may start building large inventories to book profits, owing to fears of a shortage following damage to the onion crop by unseasonal rains and hailstorms.

The increasing focus on storage, however, will help farmers record high prices for their produce.

“Unlike past years, when stockists were the only ones building stocks for release during the lean season, this year, farmers have also joined the bandwagon. Therefore, the quantity of release to mandis is unlikely to hit any remarkable high this year. Farmers will steadily release the quantity in small lots and wait for price appreciation. It is, therefore, sure prices will not go down from current levels. In fact, it will start moving up in a few weeks,” said R P Gupta, director, Nashik-based National Horticulture Research & Development Foundation.

Onion prices have remained range-bound, being traded at Rs 9.5 a kg, almost unchanged through the past month. “Onion prices have held their levels and this indicates stockists are very sensitive this year; they anticipate prices to rise in the coming weeks, in the manner seen last year,” said Atul Shah, director, Agricultural Produce Marketing Committee, Pimpalgaon.

Before the rains and hailstorms, India’s onion output was estimated to hit a record 19 million tonnes (mt) in 2013-14, against 17.51 mt in 2012-13 and 16.8 mt in 2011-12. But now, the output is expected to decline by 10 per cent, owing to the damage to the crop.

“Late-season kharif crop, which has a shelf life of up to three months, saw severe damage—15-20 per cent—in Maharashtra, Madhya Pradesh and parts of Karnataka. There is no report of damage to the onion crop in other parts of the country,” said Gupta.

Last year, a sudden spurt in prices had forced the government to import onions. Despite that, retail prices hit Rs 100 a kg. To lower prices, the government had raised the minimum export price to $1,200 a tonne; subsequently, this was withdrawn completely, as prices fell to Rs 9-10 a kg in retail markets.