The onion market in the United States is struggling with shortages, which are pushing prices up. Because of the bad weather, there has been a lower harvest and there are fewer stocks. Mexico also has a lower supply and in large parts of Europe the harvest volumes are smaller. In Spain, this, combined with the warm weather, has resulted in high prices and low stocks. Last year, the Netherlands reached a record export volume. The country is a leader in the global market. In South America, the Peruvian sweet onion season is coming to an end. Growers are happy with the results. In Australia, imported onions are making the lives of growers tough, as they are putting pressure on prices.
U.S.: good demand but low supply
The year has begun with a good start to the onion season. The market is characterised by good demand and a limited supply. Last year, the onions harvested were small, so there is currently a high demand for larger sizes. More onions were planted in 2015, although the extreme weather conditions have taken a toll on the harvest, especially for storage onions, which have suffered some quality problems.
As a result, prices are rising steadily. A trader says that there is a shortage of red and white onions, but prices for yellow onions are also on the rise. Yellow onions currently cost about 10 dollars, while at this time of the year the price usually ranges between 7 and 10 dollars. White onions cost between 26 and 28 dollars for a bag of 25 lbs (approximately 11 kg).
In a few weeks, the season will start with the new harvest from Mexico, followed by the U.S. states of Texas (in March) and Arizona and California (in May). The overlap between storage onions and the new harvest is not expected to disrupt the market.
Smaller volume onions in Mexico
Abundant rainfall in Central Mexico resulted in reduced harvest volumes last year. Due to the lower supply, there is strong demand for onions from the U.S., which is also hampered by a lower supply. Demand from Mexico should drop with the start of the season in Tampico.
Peru closes sweet onion season
The sweet onion season in Peru is coming to an end. The campaign lasts from August to January. Despite the impact of El Niño, the results have been satisfactory, according to a producer. It has been a good season, although not as good as expected. El Niño was responsible for very unstable weather conditions. The main market for sweet onions is the U.S., which accounts for 70 percent of the exports, although Europe is also an important customer, with the Netherlands and Spain as frontrunners in this continent. The South American market is another destination for the onions.
Europe, less attractive for Argentina
The start of the season is upon us. The bulk of the exports go to Brazil. Exports to Europe have been under pressure in recent years, as prices on the European market are considered too low by Argentinian growers.
Imports competing with Australian crops
Producers in Australia are facing lower revenues due to continued competition with imported onions. For the fourth consecutive year, growers have had to battle with the onions arriving from across the border. Australia's production has had a satisfactory year, with a good yield and quality. "Unnecessary" onion imports from the United States are causing prices for the domestic production to drop. Prices for imported onions amount to around six dollars for 10 kilos.
There are also concerns about the labels used on imported onions; it is said they are not always clear, causing consumers to mistakenly purchase imported onions thinking they are actually Australian.
Growers in Queensland are said to be the most affected by onion imports. The arrival of onions by sea coincides with the start of the season in the region. Due to a snowball effect, the entire sector has to pay the consequences of this, explains a trader.
Producers in Queensland and New South Wales are harvesting good quality onions. In South Australia and Tasmania, the start of the season is just around the corner. The first onions from South Australia are only just hitting the market.
The Netherlands exports record volume
The Netherlands currently has a 15% share of the world market. In terms of acreage devoted to the crop, however, the country is ranked twelfth, with 30,000 hectares planted with onions. Almost all harvested onions (95%) are therefore exported. The price that growers receive for the onions stands at around 20 cents; a good price, similar to that recorded at the start of the season. While the price continues to increase, the product is shipped to fewer export markets.
To export, quality is an important factor. It is, therefore, important to wait and see how the onions come out of storage. With lower quality, some destinations are no longer accessible. According to reports, the quality ranges from good to doubtful. In the big sizes, the internal quality has been disappointing.
Exports are going well this season. Up to week 50 of 2015, 500 million kilos of onions had been shipped from the Netherlands; a record volume. Senegal and Brazil, which saved the Dutch onion season last year with their extremely high demand, were the biggest buyers. Exports to Brazil nearly tripled, from 11,460 tonnes in 2014 to 31,101 tonnes in week 50 of 2015. Early in the year, Senegal traditionally closes its borders, but in the Christmas week, Senegal granted import licenses for another 20,000 tonnes.
What the second half of the season will bring is still up to speculation. What is certain is that the Russian market, usually a major customer in the second half of the year, is closed. Meanwhile, the onion harvest is much lower in Eastern Europe, and in other parts of Europe there are also significantly lower volumes available. The AMI estimated that while Europe's total harvest will be around 500,000 tonnes lower, despite the Netherlands recording an increase. Traditionally, fewer onions are exported in the second half of the season. The ratio is 55%/45%. Around the turn of the century, these percentages were exactly opposite, but the trend has gradually reversed, since Africa has recorded a falling trend in the first half, together with a number of destinations in Asia and Central America, and in the second half, destinations in Eastern Europe and Russia have actually declined fewer onion shipments.
Exporters are greatly optimistic about the future of the Dutch onion sector, mostly because of the good growing conditions, knowledge about aspects of breeding, mechanization and export and its unique logistics position. In recent years, Indonesia and Panama have opened their doors to Dutch onions. China is also on the list to gain market access, but this will likely still take a while, since the Chinese authorities only handle the procedures for one product per country at a time. Colombia suddenly closed its borders to Dutch onions due to a different interpretation of the rules. The Indian market has opened to Dutch onions and exporters are making their first shipments with much caution.
Warm weather, determining factor for Spanish onion market
As a result of heat waves and rainfall in spring, availability of onions in Spain is not optimal. Given the low stocks and good demand, especially for large sizes, onion prices have increased. The quality of the onions is acceptable, according to experts. Prices are expected to remain high until the end of the storage season. The large sizes cost about 60 cents per kilo, while the medium oscillate between 35 and 45 cents per kilo. Prices at origin are also high, so the margins are under pressure and traders with their own production have an advantage.
Europe, especially the UK and Germany, is the main market for Spanish onions. There is also some demand for them in Brazil. Spain has the advantage of being one of the few countries able to supply sizes between 90 and 100.
The high temperatures in Spain at the moment are causing problems for the onions in storage. Diseases and fungi develop faster, thus affecting the product's shelf life. The new season, which will officially start in April, could begin earlier because of the hot weather.
British onion market expects shortage large sizes
The price in the UK is just above average. The bulk of the British onion market is based on contracts with supermarkets, which are not adversely affected by price fluctuations. The volume on the free market is thus limited. A British trader expressed his concerns about the situation in the European market. According to the trader, Eastern European traders are especially reluctant to supply onions. They assume that the market conditions will improve for all sizes, but the British trader thinks this will only apply to the big sizes.
Disappointing market in Italy
The product's availability in Italy is limited. Last year, the harvest was lower than expected. In Bologna, the market for red onions from Tropea is good, with prices reaching around 2.50 Euro per kilo. Storage onions (red, yellow and white) cost around 50 to 70 cents per kilo. Prices are thus above average. Due to the high temperatures, there has been a drop in volume of between 10 and 15 percent. Onion traders are trying to push prices up, but these efforts have not proved very successful. White onions (sizes 6-8) generate 55 cents per 10 kilos. Import onions, such as yellow onions from the United Kingdom (sizes 70-80), generate 28 cents.
In general, the quality is poor; therefore, good quality onions are sold quickly. In the coming weeks, a good market is expected for Borettana onions. The market for shallots is disappointing.
Belgian production minimal
When it comes to onions, Belgium is largely dependent on imports from the Netherlands. Domestic production is much lower than consumption, so supermarkets import large volumes from the Netherlands. The domestic onion production is mainly intended for processing and not for supermarkets.
French onions for local market
The French onion production amounts to about 245,000 tonnes. The greater part of this volume is consumed in the domestic market. Prices for the white onions stand at 80 cents per kilo. Red and yellow onions cost 50 cents and 1.20 Euro per kilo, respectively.
German market quiet
The German onion market is calm, with stable prices. German onions dominate the market and the supply is completed with Dutch onions. In Munich there is also supply from Austria.
Each week, FreshPlaza and AGF.nl publish an overview of the market situation of a given product in a global context. With these articles we offer a picture of a world market that is getting smaller by globalisation. Next week, we will focus on cucumbers.
