Onion prices in key markets have risen sharply and even doubled in some places, including at Maharashtra’s Pimpalgaon and Lasalgaon Agriculture Market Committee, Asia’s largest onion market.
Prevailing prices
Prices jumped from Rs 1,200 per quintal on August 5 to Rs 1,900 on August 7.
They stood at Rs 2,500 a quintal on August 9.
Currently, retail prices of onions stand at around Rs 30 a kilo.
This figure is expected to rise in the coming weeks and hit Rs 60-70 a kilo by early September.
Decreased acreage
Experts reason that the price surge is happening due to speculative buying following decreased acreage of onions this monsoon along with depleted carry-forward rabi stocks.
The sown kharif area for onions as of July 31 was 13 percent lower compared to last year at 68,000 hectares.
“Last year’s number was already low year-on-year (YoY). The lack of rainfall in most areas of Maharashtra has been a drag on sowing this year. Seed sales of onions have also fallen by about 30 percent this year,” independent farm sector analyst Deepak Chavan said.
Carry-over stocks
Stocks from the rabi season, grown between December and January, are expected to be lower owing to a fall in production early this year.
“Rabi stocks in the open market are expected to decline significantly by the end of August instead of September, extending the lean season by 15-20 days, which is likely to expose the market to tightened supplies and high prices,” Pushan Sharma, Director at CRISIL, wrote.
Uncertain climate conditions
High temperatures in February led to early maturity of the rabi crop across the key growing states of Maharashtra (49 percent of all-India output), Madhya Pradesh (22 percent), and Rajasthan (6 percent).
Additionally, unseasonal rainfall in these regions in March affected the quality of onions and reduced their shelf life from six months to four to five months.
This reduced shelf life, combined with panic selling in February-March is expected to lead to even higher onion prices in the lean patch at the end of August, as per CRISIL.
Hoarding
Hoarding has been cited as another factor behind the rise in onion prices.
“Traders in the industry have started hoarding onions, storing them in large quantities as they expect a shortage to soon take over the market,” the head of a Maharashtra APMC mandi told Moneycontrol.
“Areas around Pimpalgaon and Lasalgaon have several storage units, and increasing the storage capacity when high demand is expected is the norm,” the APMC official added.
Expected cooldown
Experts expect onion prices to cool in October, when the next supply of onions is expected to hit the market.
However, a “major slump seems unlikely” as annual production is estimated at 29 million metric tonnes.
This is only 7 percent higher than the average of the past five years.
