Onion prices soar to 5-year high amid supply woes, exports boost

The rally in onion prices continued this week as the quality of the kharif crop from Rajasthan, Maharashtra and Karnataka was poor and boosted demand for the old, pricier crop at a time when there was also a surge in export demand.

The maximum price of best quality onions jumped to Rs 70 per kg from Rs 51/kg a fortnight back, while the average prices have increased to Rs 58/kg from Rs 51/kg during the same period at the Pimpalgaon market in Nashik.

There has also been a surge in exports as Bangladesh removed import duty on onions.

Traders expect prices to decline only after 8-10 days as newer crop arrivals start elsewhere in the country.

Onion prices crossed the five-year high of Rs 54/kg last week at the benchmark Lasalgaon market in Nashik.

Traders said it was because of supply shortages as the wholesale markets were closed for many days across the country for Diwali.

There was a rise of 30-35% during the last week in the wholesale prices.

Prices were going upwards due to lower arrivals.

The stored onion from last year's rabi crop is depleting fast, said Vikas Singh, vice president, the Horticulture Produce Exporters Association.

The highest price is fetched by the stored onions harvested in March/April, while the new crop's arrival has been delayed by heavy rainfall in September.

There has also been a surge in exports as Bangladesh removed import duty on onions till January 15 to cool down local onion prices.

India had halved the export duty on onions to 20% in September, just ahead of the assembly elections, as the onion farmers had united to vote against the decision of the central government to ban onion exports.

Trade insiders said when customers see shortages, everyone in the trade cycle tends to buy more.

Once arrivals increase, the demand will also decline.

The arrival of the new crop from the kharif harvest has started increasing in some markets like Alwar in Rajasthan.

The arrival was 40% higher on Sunday than a day before.

It is soon expected to also increase in Maharashtra, Madhya Pradesh and Gujarat, suggesting that a downward movement in prices will follow, said Singh.

Trade insiders expect the onion prices to cool down to comfortable levels of around Rs 30/kg in wholesale markets by the end of November.

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