Yet again, onion prices have been fluctuating this season.
The fluctuation in prices is often a result of a mismatch in demand and supply — if the prices are rising, it is because there is a shortage of supply and an increasing demand and if the prices are falling, it is because there is an excess of supply of onions and a consequent fall in the demand.
The supply shortage can be driven by the weather and the rising exports. That is when natural market forces are at play. The unnatural occur when hoarders step in to influence onion prices artificially creating a supply crunch and ratcheting up prices. And as it happens with commodities, there is also speculation at play, which impacts prices.
On several occasions in recent years, onion prices have soared to Rs 100 per kg from the season's lows of Rs 20 per kg during the off-season.
This year, though not as bad as the previous year, Maharashtra and New Delhi are experiencing the impact of the falling supply and the rising demand for onions.
The selling price of the vegetable hit between Rs 30 and Rs 40 in the capital while at Lasalgaon in Nashik district of Maharashtra, Asia's largest wholesale market for onions, prices rose to between Rs 21 and 22 per kg on reports of a possible drop in the Kharif output of the bulb crop because of heat wave in the state, PTI reported.
The price of onions was Rs 14 a kg in September. It later dropped to Rs 7.42 a kg in the same month, according to the commodities data. At this time, the prices were on a downslide as there was an excess in supply and there was a consequent fall in the demand.
Maharashtra, Gujarat, Odisha, Karnataka, Uttar Pradesh, Andhra Pradesh, Tamil Nadu, Bihar, Punjab and Rajasthan are the major onion-producing states.
For onions, most of the cultivation takes place in Rabi season, even though it can be grown in the Kharif season as well. One of the major factors about onion cultivation is that it requires the soil to be moist. Once the bulb of the vegetable comes to being, the farmer is required to cut back on irrigation.
Hence, the drop in overall rainfall this year did no harm to the onion crop. The Indian Meteorological Department (IMD), quoted by Reuters, said the annual monsoon season was below average and less than forecast. Though this had an impact on the major crops, onions as such were not affected as much, explaining why the onion prices have not skyrocketed to Rs 100, just yet.
The second reason for the rise in the prices is a surge in the exports. For India, the total exports declined 2.2 percent year-on-year to $27.95 billion in September 2018. However, for onions, India remains to be the second top exporter of the vegetable, covering 40 percent of the world’s requirement, after America.
First Published: IST