Skyrocketing onion prices amidst supply shortages & high demand

A decrease in onion supply coupled with increasing demand has led to a significant rise in the onion prices over the past fortnight. The farmers are holding back their onion stocks, hoping for an increase in prices in the market after the rabi crop of 2023-24 declined. The intense heat and sporadic, unseasonal rain showers have impacted the supply of tomato, potato and garlic as well, thereby causing a surge in the prices of these commodities.

Onions, a staple ingredient in the Indian cuisine, have seen a price surge over the past two weeks due to a supply slowdown and rising demand. The combination of fewer arrivals and heightened demand ahead of Eid-al-Adha (Bakra Eid) festival have driven up onion prices across the country.

Prices have climbed up by 30 to 50% over the past fortnight. The average wholesale price of onions at the Lasalgaon mandi in Nashik on Monday (June 10) was Rs 26 a kg, as compared with Rs 17 on May 25. In several wholesale markets throughout the Maharashtra state, the price of the highest-quality onions has surpassed Rs 30 per kg, notwithstanding their small share in the overall traded volume.

In the wholesale Agriculture Produce Market Committee (APMC) market in Vashi and in the retail markets, the price of onions has doubled over the past two weeks. At present, onions in the wholesale market are sold for Rs 25–30 per kg, compared to Rs 10–15 per kg earlier. The onion prices ranged between Rs 20 and Rs22 per kg last week. Onion prices in retail stores have skyrocketed to Rs 36–40 per kilogram. The selling price of onions ranged between Rs16–18 per kg two weeks before.

Why the onion prices is high?

Onions have been in high demand domestically despite the slowing down of onion exports on account of the 40% export levy, according to traders. Demand for onion was also on the rise due to the festivals. Onions from Maharashtra are particularly in great demand, especially from the southern region.

While the farmers are busy preparing for the kharif season, they are also expecting that onion prices will rise further on account of the anticipated decline in the 2023–24 rabi harvest. Farmers are, as such, hesitant to sell their onion stocks.

It is also to be noted that Maharashtra’s farmers have stored the high-quality, longer-lasting produce that is to be supplied in the monsoon season. Onions that reach the markets from June onwards come from inventories that are kept by farmers and traders. Present arrivals are being affected since they are supplying from the stock that has not been stored, and this stock has substantially decreased. 

At Lasalgaon, an average of 12–15,000 quintals of onions are auctioned each day; however, this has now dropped to 6,000 quintals per day. 

Moreover, stockists and farmers are also hopeful that the export duty on onions would be eliminated by the central government, and they are therefore holding onions, expecting a further rise in prices. (In May this year, the Centre had lifted the prohibition on onion exports, imposed nearly six months ago. However, the government restrained the free flow of outbound shipments by imposing a minimum export price (MEP) of US$550 per tonne along with 40% export duty.)

Following the lifting of restrictions last month, the onion exports to Bangladesh, Malaysia, Sri Lanka, and other nations have resumed. 

Since the lifting of the export prohibition on onions last month, the Nashik district has been exporting on average 100 containers (30 tons each) of onions per day. With the rise in the volume of onion exports in recent times, the prices of onions are amoving upward. 

Prices of potato, tomato and garlic is also increasing

Over the past fortnight, the prices for potatoes, garlic and tomatoes have also gone up in tandem with onions.

A decline in arrivals over the past few days, ascribed to the bad weather and decreased production this year, has led to a spike in potato prices. Potatoes are presently being sold for Rs 20–25 per kg. They were selling at the wholesale market for Rs18–20 per kg last month. Potato prices in the retail market have gone up from Rs 30 per kg in the previous month to Rs 40 per kg at present.  

The extreme weather conditions this year, have impacted the garlic crop as well. Garlic prices have scaled up to Rs 200-250 per kg in the wholesale market. While in the retail market, garlic is being sold at Rs 400 per kg, up from Rs 300 per kg until last weekend. It was sold for Rs 240 per kg last month. 

Tomatoes have also followed the similar uptrend in prices. At Vashi APMC wholesale market, tomato prices have increased to Rs 40 per kg, owing to the demand- supply mismatch. Prices of tomatoes have surged as a result of a limited supply from crop areas following the end of harvest season. The drop in supply was largely due to crop damage caused by unseasonal rain in the producing areas. Until the new harvest arrives by late July, this trend is going to persist.  

As for other vegetables, it is a summertime fixture that the supply gets scarce. Vegetable prices are anticipated to decline when new arrivals hit the market in next few weeks.

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