Onions

Onions Global Market Outlook:

ONIONS MARKET

• Global Production: 105 MMT

• Supply Growth (2022/23): 1.0 percent rise

• Price Projection (2022/23): 8 to 10 percent increase

• Key Buying Months in Top Producing Regions: September–December

Onions: Global Supply Analysis

• Overall, the supply of onions in 2022/23 is projected to witness a marginal increase, driven by the rising demand from the foodservice sector

• The current pace of harvest arrivals from India has been increasing which had got off to a delayed start; while tighter supply is likely for the US and Europe due to drought in key onion growing regions for the upcoming harvest

Cost Structure Analysis : Onions

High inflation is anticipated for the production of onions in 2022 mainly driven by the expected surge in fertilizers, energy, transportation and labour costs.

Cost Parameters in Production and Harvest

• Acreage for onion cultivation in India is often impacted by drought, which increases production costs and tightens crop output

• Onion crop requires adequate water. Lack of advanced irrigation systems and dependency on rainfall in developing regions will lead to an increase in water usage and costs

• Onion harvesting is not labor intensive and hence, the rising labor costs in China and the US is unlikely to have a significant impact on production cost

• Crop protection and maintenance account for a major portion of production cost. The lower fertilizer prices could help keep the crop protection and treatment costs low

• The lack of water, due to the highly erratic nature of the monsoons in India is the primary factor that exerts upward pressure on cost of cultivating onions

• The 2022 crop is likely to face high costs, due to surging agricultural input cost inflation for energy, fertilizers, labor and transportaion

Porter's Analysis on Onions

Supplier Power

• Large vegetable processors engage in contract farming and ensure steady supply

• Premiums/discounts are set based on the yield rates

• Farmers have an upper hand in negotiations with smaller processors

• These small processors are prone to higher price fluctuation risk

Barriers to New Entrants

• High initial capital investment for processing facilities with large production capacities

• Access to raw materials is a major challenge

• Fluctuating margins, due to dependency on weather conditions and no supply guarantee

• Higher cost of raw materials compared to competing larger companies

Intensity of Rivalry

• High competition prevails among few established players in developed markets

• Presence of large number of small-scale players in developing countries dilutes the intensity of rivalry

• Cost of production largely depends on raw material prices and large processors minimize price fluctuation through contract farming

Threat of Substitutes

• Processed vegetables do not face any threat from substitutes

Buyer Power

• Buyers of processed vegetables hold a moderate negotiation power

• Large food chains, who engage in long-term contracts, hold a higher bargaining power

• Other buyers, such as infant food, juice, and purees, engage in contract processing of vegetables