Onion price rises on fear of low acreage

Small Farmers' Agribusiness Consortium plans to bring onion from Nashik to Delhi

Onion prices have shot up sharply in the past three days due to a massive decline in arrivals in mandis and weather-related worries that forced stockists to hold on to inventories.

In the benchmark Lasalgaon mandi, the modal price of onion jumped to Rs 2,025 a quintal on Tuesday from Rs 1,650 a quintal on Saturday. In nearby Pimpalgaon, spot onion shot up to Rs 2,000 a quintal on Tuesday from Rs 1,400 a quintal three days ago.

Farmers and stockists brought additional quantity into the market as this price was seen after many months. Stockists were holding their stocks of onion because of the government’s action of controlling prices despite estimates of 15-20 per cent damage to the crop due to unseasonal rain in March-April.

“There are two factors supporting the price rise. Around 15 days of less rain have threatened stakeholders’ earlier claim of normal or excess sowing this year. Crop damage due to the unseasonal rainfall in March-April also lowered supply,” said Atul Shah, director, Agriculture Produce Market Committee, Pimpalgaon.

In the Pimpalgaon and Lasalgaon mandis, however, stockists were afraid of a fall in prices due to government action. They brought more quantity into mandis, resulting in arrivals swelling. “The trend will reverse now. Stockists have brought the maximum quantity, which will affect lean-season supply. Since sowing is expected to decline this kharif season due to lack of rain in major growing areas, we expect onion prices to touch Rs 3,000 a quintal in the coming days,” said Shah.

Small Farmers’ Agribusiness Consortium (SFAC) will soon bring onion from Nashik to Delhi. SFAC has procured 10,000 tonnes of onion under the price stabilisation fund announced by Finance Minister Arun Jaitley in the last budget. This quantity is negligible against overall production of around 19 million tonnes, still intervention by a public sector company may change market sentiment.

"We are planning to bring our onion stored in Nashik to Delhi for market intervention. SFAC is also waiting for its procurement and trading arm - Kisan Mandi - to start procurement again in Nashik," said an SFAC official.

After achieving the target of 10,000 tonnes, SFAC halted procurement and storage of onion.

Sanjay Sanap, a Lasalgaon based stockiest, said that arrivals will exhaust soon with traders due to less production estimated during last season. Onion prices would continue to rise this season, he added.

Echoing similar response, the apex body Associated Chambers of Commerce of India (ASSOCHAM) forecasts onion price to rise between 10-15 per cent in the rainy season. The body has suggested timely and realistic assessment of crop and a reliable estimate of consumption requirement state-wise with proper understanding of peak demand period or month and volumes is a pre-requisite for prudent handling of the developing situation in onions.