Onion prices are expected to increase significantly to Rs 60-70 per kg in the retail market starting early September on a likely shortfall in supplies, Crisil said in a research report. However, prices should soften as supplies improve in October.
“Rabi stocks in the open market are expected to decline significantly by the end of August instead of September, extending the lean season by 15-20 days, which is likely to expose the market to tightened supplies and high prices,” Crisil noted in the report. It said unusual weather conditions disrupted the traditional supply schedules.
Onion prices currently hover around Rs 30 per kg.
According to the report, high temperatures led to early maturity of the rabi crop across the key growing states of Maharashtra (49 percent of the total share), Madhya Pradesh (22 percent), and Rajasthan (6 percent) in February.
In addition, unseasonal rainfall in these regions in March affected the quality of onions and reduced their shelf life to 4-5 months from six months, raising storage concerns and triggering panic selling by farmers.
The rabi crop, which is usually brought to the market in March, was harvested early and made available in February, coinciding with late Kharif supplies and leading to a glut in the market. The rabi stock is usually stored to cater to demand until end-September, after which the Kharif crop arrives to fill the gap.
However, due to the reduced shelf life of rabi onion and the panic selling in February-March, the supply-demand imbalance is expected to reflect in onion prices towards the end of August, during the lean patch, Crisil said.
October relief
Onion supplies should improve once the Kharif arrivals start in October, leading to softer prices, according to Pushan Sharma, director at Crisil.
“But this lower realisation in onions has created a negative sowing sentiment among farmers for the Kharif 2023 onion crop. As a result, we expect acreage to decline 8 percent this year, and kharif production of onion to fall 5 percent on-year,” Crisil said in the report.
However, a major slump seems unlikely as annual production is estimated at 29 million metric tonnes – 7 percent higher than the average of the past five years (2018-2022), Pushan said.
The report comes after tomato prices shot up this summer. Experts said tomato prices are expected to stabilise by the start of September.
Also Read: Oh Dear: How the food industry is coping with costly tomatoes
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