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Ukrainian Grain & Oilseed Market

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Global onion prices are at record-high levels due to a global shortage of onions

28.03.2023 12:00 "Agro Perspectiva" (Kyiv) — Global onion prices are at record-high levels due to a global shortage of onions. In the Netherlands, the onion market has stabilised around 90 cents for the 60/80 grade, while in Germany, Spanish and Dutch onions are well above previous years’ price levels, and demand for import onions is relatively high. Meanwhile, the UK, Italy, and Spain are also facing reduced production due to drought and lower plantings. In Italy, the demand for onions is high, and prices have stopped after a considerable upward race, while in Spain, the prices for onions have reached never-before-seen levels due to the global shortage.

In Egypt, the price of spring onions has increased by 80% due to shortages and increased costs. South Africa is experiencing a rise in onion prices due to lower yields, fewer hectares planted, and chronic electricity cuts, while also exporting more onions than usual. North America has plentiful onion supplies, but sluggish demand is keeping prices low. Tasmanian onions are in high demand in Europe due to shortages caused by a heatwave and drought last summer. Finally, New Zealand’s onion crop has been affected by cyclones, causing extensive damage and a reduced yield. Overall, the global onion market is characterised by high prices and reduced production.

Netherlands: Onion market stabilises at high level

«The onion market seems to be stabilising somewhat. For a while it looked like the trees could grow to the sky, but it turns out that is not the case after all. The price for yellow onions in the bale is now stabilising a bit around 90 cents for the 60/80 grade,» says a Dutch exporter. «Speculators also need to get rid of their onions at some point and there seems to be a bit more product available than a week or two ago. At the same time, demand is quite broad. Both towards the east to countries like Poland and Serbia and towards the south to countries like Spain and Italy, onions are in good demand. There is also optimism towards the onion set season. The first onion sets will be back on the market in mid-June and that has been a big bet this year. That could therefore be another good trade, but those who still want to get in are too late, as they are all sold out.»

Germany: Record high onion prices

Like many other market segments, the onion market is currently characterized by record high prices. Spanish and Dutch onions, among others, are well above previous years’ price levels, reports a wholesaler. «The first onions from New Zealand are now on their way and the question is of course to what extent the recent floods on the Northern Island will affect this year’s export volumes. Currently, that is difficult to estimate.» At the same time, demand for import onions is relatively high as last year’s yield in Germany was quite low. The season will definitely not be extended to July as was the case last year. Red onions, on the other hand, are abundantly available, which is partly related to the acreage expansion last year.

Over the long term, organic onions in particular are gaining ground in Germany. The acreage has almost doubled since 2018, report organic market-organizations Naturland and Bioland. «Despite the high growing costs, many growers are showing interest in the production of organic onions. Conversations with domestic retailers confirm this ongoing trend.» However, given the current market situation in the organic segment, the organic trade organizations are cautious. In the long term, however, they are looking at improving cultivation and marketing structures around organic onions in cooperation with Bio Kartoffel Erzeuger e.V.

France: Lack of large sizes drives up demand for French onion

Onions are selling for twice as much as last year at this time. With the hot weather at the beginning of the campaign, the high temperatures and the lack of rainfall, it was foreseeable that there would be very few large sizes for this season. And indeed, in France, we have a majority of small sizes and the shortage of large onions is also felt in Western Europe. As a result, onions are currently selling at very high prices.

The onion market is so tight that small sizes, which are usually downgraded, are selling at the same price as large sizes. This lack of product could lead to a premature end to the campaign in late spring. This is a worrying situation when you consider that spring onions will enter the market in late spring. Sellers are already using imported onions, which is contributing to the price increase.

Despite this drastic price increase, consumption continues to be fluid. One might have thought that purchases would be reduced given the prices charged, but this is not the case.

UK: Onion production almost a quarter smaller this year

UK onion production is down 100,000 tonnes. The country would normally grow around 450,000t and consume around 800,000t. Imported onions come from all over the world, but mostly from the Netherlands and Spain. The shortfall is not just down to the drought, but also an 8.5% reduction in plantings. Almost all the major onion growing countries throughout Europe are down on plantings. Spain is estimated to be down from 1.567 million tonnes to 1.198mt. The Netherlands is estimated to be down from 1.768mt to 1.494mt. Overall, the European crop this season is estimated to be down 13.4% from 7.293mt to 6.314mt.

Italy: High demand and high prices for onions in Italy

The onion market is in a stable period. A trader from the north of Italy says there is not much product, sales are fairly regular and prices have stopped after a considerable upward race. But prices remain well above last years’ levels. In particular, yellow onions are in high demand and imports into Italy have stopped. Germany and Austria do not export any more, and the Netherlands only does so at high prices: ˆ0.90 excluding transport. Onions are starting to arrive from Egypt at ˆ0.90–0.97 with transport included. White and red onions have lower demands but prices are still high. In the coming weeks, white onions from India should arrive in Italy.

A wholesaler from southern Italy says: «This year we are experiencing an abnormal trend for onions. The yellow onion, which has usually always fetched lower prices than the red and white ones by at least 0.10–0.15 ˆ/kg, this year is fetching prices of around 1.00 ˆ/kg. There is demand, because it is a widely consumed product, with limited supply. At the moment we are working with German and Austrian products, but in a while, Egyptian goods will also arrive on the market. Here too, purchase prices of 0.85–0.90 ˆ/kg are expected, which have never been verified before. Prices for white and red onions are also on the rise this year, averaging 0.70–0.80 ˆ/kg. Now that the Italian product is coming to an end, we will start processing onions from India. Although the purchase prices are not yet known, we believe they will be high.»

According to GfK Consumer Panel data, onions are purchased by 75.9% of Italian households. In the last twelve months ending in January 2023, the number of purchase transactions and the amount paid remained stable. Instead, the quantity is decreasing. Just over 2.2 million Italian households bought organic onions. There is a strong growth trend for frozen onions, which in the last year rose from almost 1.4 to over 1.7 million purchasing households.

Spain: Spanish onion prices reach never-before-seen levels due to the global shortage

Spanish onions are reaching very high prices due to the lower supply available both at the national and global markets. Spanish late onion production has fallen by 45 to 50% this season compared to previous years. The area devoted to this crop decreased by nearly 30% due to the poor results achieved in previous campaigns. Demand for onions has been strong since the beginning of the campaign and prices have risen to never-before-seen levels. There are many importers who ask for onions, but almost all of the onions are already sold.

There’s a significant global shortage. Many countries have imposed export restrictions to protect their local markets, which is quite unusual. There have been restrictions in South and Central America, in Pakistan, and now in Morocco as well. Spanish exporters expected to fill our supply gaps with onions from New Zealand, but there were significant delays caused by the typhoon that hit the country’s main production area. Spanish importers also receive fewer volumes from Peru because of the socio-political problems that was facing some weeks ago. China is exporting a lot after covering its domestic market, but there is still little supply in the markets. It may seem that it is a good year for Spanish onions due to the high prices, but the truth is that profit margins are very tight when one takes into account the available supply and the significant increase in production costs in the last year.

The onion export market is also certainly interesting. A look at global statistics and the rankings of the largest exporters reveal the - perhaps surprising - importance of Central Asian countries in the world trade of onions and shallots, not just dried (Tajikistan was the second largest exporter in the planet in 2021 of green onions and shallots), and allow us to see which players could still have a bigger share of the market. And one of them could be Egypt, outside the top 10 exporters established by the FAO for 2021, but the third largest player in onion exports from the Mediterranean arc.

As a Spanish importer comments, «at this moment we see that there is a lack of onions in the market and we are studying importing them into Spain from Egypt. However, there are several problems that we must overcome», he points out. «One of them is that the yellow onion grown in Egypt is a slightly flatter variety than the one grown in Europe and many customers don’t want it for that reason.»

«On the other hand, there are importers who are reluctant to work with Egypt because some time ago, at origin perhaps, the necessary controls were not carried out. In all countries, companies are created to speculate and they create problems, but that is why we control the cultivation in the field and the product that we import, focusing on quality rather than volume. In the end, the one that wins the customer’s trust is the product itself.»

«To all this we must add the entry problems that we see in Spanish ports in general, but especially in Algeciras; and it seems that no one is paying much attention to these issues when it comes to importing. I wonder how it is possible that a container from Egypt that arrives in Rotterdam leaves the next day, and in Algeciras it can take up to 7 and 8 days, longer than the transport itself.»

It should be noted that Egypt already has an important role in the global market for other commodities, such as potatoes. The most recent data places the country as the sixth largest potato exporter in the world, only behind the 4 European powers grouped together in the NEPG and the United States; the latter, a country with 9 times the surface area of Egypt where, let us remember, having a desert that occupies two thirds of its territory has not prevented it from becoming an agricultural power.

Egypt: 80% increase in price of Egyptian spring onions

Prices for Egyptian spring onions have significantly increased. The demand for spring onions is very high these days, partly due to the shortage on spring onions at the moment. This shortage has led to an 80% increase in the price, although this isn’t extra profit. Costs in Egypt have also increased. The price increase for spring onions resulted in less business with the UK market this season, as the price level was too high for their liking. At this point in the season, the weather is the main subject of the talks in Egypt. A lot of land has been damaged by the weather and growers will need to be careful in selecting the lands to be used.

South Africa: Onions prices set to continue to rise

The provinces of the Northern Cape and the Western Cape (the Koue Bokkeveld) are harvesting onions. Given current high prices, producers are marketing faster than usual, a vegetable trade analyst says. Demand is very good, an onion trader says, while there have been lower yields in South Africa, as a result of chronic electricity cuts which hamper irrigation during high temperatures. Fewer hectares were also planted, around 20% lower, also due to heatwaves or excessive rain and input costs. Ironically, input costs per hectare are now higher with fewer hectares planted.

Prices are still busy climbing, he notes, with an average on Western Cape onions of R9,50 (0.48 euro)/kg, around R95 (4.8 euro) for a bag. A top quality medium bag sells for up to R120 (6.16 euros) at the moment. Onion prices are 89% higher compared to last year. High prices started with the smaller harvests from Limpopo last year.

«We’re expecting prices could still rise. We don’t know where it will end, but it’s going to be a good onion year.»

Last year there was a high number of red onions in proportion to white onions, as a lot of red onions were planted in Limpopo which came to market en masse with no price premium. From December onwards, red onion volumes started to drop and a price premium re-emerged.

The early Limpopo onion season will now also be getting underway as South Africa nears winter. Low volumes from them mean onion prices could remain high until the end of the year.

South Africa is exporting more onions than usual. Enquiries have been much higher than usual, with emerging interest from countries like Saudi Arabia, Portugal and Croatia, as well as the usual trade within Africa.

China: Gradual increase in supply makes onion prices more stable than before

«In the past two months, due to the serious shortage of supply, the price of the international onion market has continued to soar and run at a high level. Since the beginning of January this year, the price of onions has been quite strong, but the demand is still strong. Among them, orders from the Japanese market for Chinese onions have increased, and they can accept higher prices. Recently, with the liberalization of China’s epidemic policy, domestic production capacity and onion supply have gradually recovered, and onions will be more abundantly supplied. We expect this will lower market prices,» according to a, onion grower and trader from Shandong province. On the Chinese domestic market, prices for onions from Gansu province have, since August last year, been 20% to 30% than in the previous year. Gansu’s production season will end by mid-March, when Yunnan onions enter the market. So far the outlook for Yunnan onion production looks strong.

North America: Sluggish demand for onions, supplies plentiful

Supplies of onions continue to be plentiful with storage crop volume available while new growing regions are coming on too.

For storage crop onions, the market is holding steady but lower than was anticipated in the fall of 2022. One shipper says there was hope going into the end of the month that the market would rise. However, given what’s still available out of markets such as Canada, which will probably ship into June, that may not happen.

In other growing regions, while Texas will be in full swing in two to three weeks, Georgia is early and should start around April 1st. California is late and will probably start the first week of May.

Meanwhile, volume from Mexico started coming towards the end of January and it’s steadily picked up from there. Over the course of the next two weeks is the height of the Mexican season. Add to these ample supplies sluggish demand for onions. «February is slow for the produce business in general,» says the shipper.

He points out that while the U.S. is a sizeable producer of onions, it’s also a net importer bringing in product from Canada, Mexico, Egypt (via Canada), Peru and more. «Our domestic production was way down this year but other areas in the world were not,» he says.

This means that while pricing is a bit depressed right now, the market should upswing. «We’ll get an uptick in movement in early April because of Easter and it will pick up when California gets in there.»

Australia: Tasmanian onions benefit from high European demand

Tasmanian onions have started shipping to Europe to meet the huge demand there created by a heatwave and drought last summer. The prices in Europe are very high at the moment.

Tasmania has had very good weather for the last couple of months which has been great for the onion harvest. One exporter said «We have more requests for onions that we could possibly fill, this is due the shortage in Europe. This has been a very odd year where we expected a lot of rain and quality issues, but it has turned out to be a very good year and any surplus volumes will go to the European market. We expect that the onions we export will be able to be stored for a year without any quality issues due to the quality.»

New Zealand: Cyclone Gabrielle hits New Zealand onion crop

Following a challenging growing season onions, New Zealand growers are now facing an even more challenging harvest.

It has been an extremely tough summer for New Zealand’s onion growers with February’s Cyclone Gabrielle, which followed flooding in January. Many horticulture crops in regions across the North Island were wiped out completely, with others suffering extensive damage across hundreds of hectares. This will impose a massive cost for growers and the industry, and is already causing shortages and price rises in domestic and export markets, as farmers clean up and rebuild following the devastation - some expecting that task to take several years, and some growers facing the possibility of not even being able to return to growing.

Sizing is expected to be smaller than normal, with the final marketable yield expected to be lower. Other markets in the Northern Hemisphere are short of onions, so demand is good in Europe, Asia, and the Pacific. New Zealand exporters are looking forward to starting exports to Thailand where the import duty has been reduced to 0% after signing of an FTA.

Source: FreshPlaza

Agro Perspectiva

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