February 22, 2024

Leading Business

Business in Evolution

GLOBAL MARKET ONIONS

9 min read

Very high to near historical high prices for onions are seen on many markets in different parts of the world. This is driven by several factors, with the shortages being exacerbated by extended onion bans from traditionally large exporting countries of India and Egypt. European importers have turned to China to supply more onions due to the bans as well as lower production in most of Europe.

However, the Red Sea attacks are delaying shipments from China. They are happy with the big increase in demand from Europe and domestically, but exporters in China are cautious due to this shipping challenge. In the past half month, the price in China has surged by nearly 30%. India’s neighbouring countries are acutely feeling the export ban with inflated prices in their markets as a result. Germany is seeing high prices for domestic and imported onions from Spain due to a smaller harvest volume. Given the higher prices Spanish producers are set to expand production this year. Italy is seeing a complex onion market with very high prices.

Austrian onion prices have started to increase while they are also seeing export interest. Denmark has seen an increase in demand from the rest of Europe, but they are not able to fully supply the extra orders with supply going to contracted customers domestically and in Germany. Exporters in the Netherlands say at this price level it is challenging to compete in the global onion market. In North America Mexico has lower onion stocks with the impact of storms and hurricanes last year August that has led to lower production. Pressure on North American onion supplies could be felt until August as Mexicans turn to the US for supplies. Eastern Canada has had a lot of rain that impacted their crops. Sweet onion supply from Peru to the US has been short too leaving white onions at almost historically high pricing. Peru also increased onion exports to Spain to fill the gap left by Egypt’s ban.

Germany: High prices, lack of large onions
Prices for both domestic and Spanish onions are quite high, which is partly due to the smaller harvest volume. Wholesalers tend to buy the larger calibres of 70+, while retailers and households buy calibres of 35 to 50 mm. However, there is simply a lack of large onions. Many farms in Spain do not want to sell the onions yet because they are waiting for higher prices. Prices are therefore rising continuously at the moment, explains an onion wholesaler.

Sales of organic onions have increased steadily over the last few years. The proportion of organic onions is growing steadily, which is certainly also due to the smaller packaging containers. Red onions are sold in units of between 300 and 500 grams, while yellow onions are predominantly found in 500g to 1kg packs. In addition, the organic onion business is characterised by relatively low price pressure.

Austria: Smaller export volumes
After cooling down noticeably over the course of the second half of the year, the producer price for loose onions, sorted in crates, has recently started to move again at an average of EUR 42.50 per tonne (+ 5 % on the previous month). In addition to progressive sales on domestic soil, interest in Austrian goods is also being shown at the export markets. Large onions in particular are in demand.

Italy: Very high prices
The situation on the Italian onion market is complex and prices are very high. As confirmed by a trader in northern Italy, at the end of January white onions were sold in retail trade at 1.40 €/kg (1 kg bag), while the price of white onions in 10 kg bags was slightly lower, around 1.20 €/kg. Prices for red onions were also very high (1.20 €/kg), while yellow onions are now rising again, with prices around 0.90 €/kg. The trader fears that stocks of old product will not be able to make it through to the new crop and that there will be a shortage of stock.

India has blocked exports of white onions until at least 31 March and Italy has imported significant quantities in recent years. With the Suez Canal blocked, there is a risk that Indian white onions will arrive in mid-May, too late for the Italian market. The difference could be made by Sicilian production, which is expected to arrive from mid-April, provided it is sufficient to meet national demand.

In Italy, 78% of households buy the product regularly: to cope with rising food costs, consumers buy a little at a time avoiding stock-outs and waste.

Spain: Low stocks
Spanish onion stocks are lower than expected at this stage of the campaign, which made exports go down by almost 6% in the last three months. The Spanish traders are uncertain about how much onion availability they will have and if that will be enough before the new harvest kicks off as the imports from the Southern Hemisphere (mainly New Zealand and Australia), will surely be 15 to 20 days later due to the conflict with the Houthis in the Red Sea.

Anyway, at this moment sales are quiet, even slower due to the road blockades in France and Belgium. At least, the lower demand at the moment allows dosing well the supply available. Prices at the moment are still high for this period, around 68-70 cents per kilo for the 25kg sacks.

The acreage is expected to increase significantly for the 2024/2025 season, as seed companies have already reported a remarkable growth in sales, especially for early varieties in the South of Spain (Andalusia and Murcia). The acreage already grew 16% for the 2023/2024 season and it grows again this year in which is expected to recover the 30% drop of two seasons ago. This is due to the exceptionally good results in terms of profits of this last two seasons, which is attracting more non-specialized growers.

Denmark: Sees higher demand from rest of Europe
Growers and exporters here have seen much higher demand for onions as a winter staple vegetable due to the colder weather across Europe, but they do not have enough volume to meet this greater than usual demand.

Denmark has so far had a good winter without a lot of snow or very adverse weather conditions like those experienced in the rest of Europe. This allows them to have very stable production of onions.

A trader said their volume is not being enough to really help to meet the increased demand from Spain and Italy. They do provide a lot of onions to their primary contract customers in Denmark and Germany, but they are not seeing much higher prices despite the lower volumes of onions in these markets.

Chinese market: Exports and price increase due to big European demand
In recent months, China’s onion export prices have been rising. Affected by the news that Egypt extended its onion export ban, onion prices surged sharply.

The main demand in the market is red onions. Driven by this, the price of yellow onions has also increased to a certain extent. There is a shortage of high-quality red onions in the market, orders from the European market are growing rapidly and the demand is big. In the past half month, the price has surged by nearly 30%.

The reasons for the strong demand are: First, the harvest in European production areas this year was not as good as expected, resulting in a shortage of onions in the European market and a large demand for imports. Secondly, Egypt recently decided to extend the onion export ban. Egypt is an important source of imported onions for Europe. After the export ban was extended, many European orders were transferred to China, driving up prices. On the other hand, some domestic stockists are hoarding onions to speculate on prices, accelerating price increases.

Meanwhile, due to the attacks in the Red Sea shippers from China to Europe needs to take detours, which greatly increases the transportation time and increases the risk of rotting. Therefore, Chinese exporters are more cautious about onion orders from Europe at this stage.

US: Pressure on North American onion supply could be felt until August
Supply of onions is very short due to many factors including Hurricane Hilary in late August which the Baja Mexico onion crop. That meant that the supply that should have been growing and ready to supply the domestic Mexican market was not available and in turn, U.S. onions are being purchased.

Also, Eastern Canada had ample rains at harvest which impacted their crops. Add to that the hurricane-related rain the Treasure Valley saw at the end of August during harvest which has created some higher than anticipated shrink.

Additionally, Peru has also had an extremely short crop of sweet onions this year so the U.S. has been supplying domestic sweet onions in place of Peruvian sweets for the larger part of the year.

This leaves white onions at almost historically high pricing and waiting on the next supply of white onions to be harvested which will be in Mexico in early February. Yellow onion supply isn’t as dire though pricing is in the upper teens. Medium and jumbo reds are $12 FOB.

India: Export ban leads to inflated prices in region
Indian onion exports, which amounted to $561 million in 2022-2023, are projected to significantly decline in 2023-2024 due to an eight-month export ban. This situation adversely affects not only farmers but also traders, who are particularly hit by the ban’s timing, which coincides with the international contract renewal period in January. The export ban has resulted in inflated onion prices in neighboring countries like Nepal, Bangladesh, Sri Lanka, Bhutan, and Malaysia, which depend on India for their onion supply. Traders are apprehensive about the long-term financial implications. The ban also leads to a market share loss for Indian exporters as countries like China and Pakistan gain an edge in providing onions to countries previously reliant on India.

Netherlands: At this price level it is challenging to compete in the global onion market
Dutch onion exports are experiencing quiet weeks. The export to Africa has concluded for the most part, and now the focus is on European sales. However, many European customers still consider the onions to be too expensive. An exporter mentions that a new world order seems to be emerging in the onion industry, with China and Egypt gaining more influence. “In Europe, farmers are being cornered under the guise of regulations, causing food prices to rise. Despite the increased costs, it has become a lucrative way to keep prices high through speculation. I think we have forgotten that we need to export the majority of the harvest. How this season will unfold remains a question, but I anticipate a challenging market with yellow onions because we cannot compete well at this price level with surrounding countries. Additionally, we are lagging quite a bit in export figures compared to last season.”

Belgium: Large price difference between quality of onions
There has been an increasing challenge in Belgium in the price differences in quality of onions. “Finding good quality is not very difficult. They are relatively expensive at the moment due to low supply, but the price difference between good, lower and poor quality onions in particular is getting bigger and bigger. That also ensures that the differences in quality are getting bigger today already. The question then is: What raw material do you buy to stay competitive? Will you buy cheap onions to also offer it cheaper or will you stick to quality? That is the dilemma that is increasingly emerging and where we see many parties opting for cheaper prices, but at the expense of quality.

Peru: Increases its exports to Spain
The export ban on onions from Egypt represented an opportunity for Peruvian onions in Europe in 2023, which despite a 12% contraction in total volumes shipped, concluded – with data available until November – with a growth of 2 % of the value exported compared to the same period in 2022, thanks to a price increase in the international market.

Spain, in fact, became the second largest importer of Peruvian onions, after increasing its purchases by 53% in volume and 91% in value compared to 2022, which led it to have a 24% share, according to with data from an important Peruvian consulting firm.

The United States was once again the main destination with a 58% share, but experiencing drops of 24% in volume and 16% in value; although it was not the only destination in the top 3 with declining results. Colombia, which was dropped to third place by the rise of Spain, decreased its purchases by 22% in volume and 23% in value.

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