KANSAS CITY — Onion markets typically receive little attention, but a world-wide shortage and prices nearly triple year-ago levels may bring tears to buyers’ eyes before prices show some seasonal moderation in the next few weeks.
Average point-of-first-sale (paid to growers) dry bulb, or storage, onion prices stood at 7.93c a lb in December, an unusually depressed level, the U.S. Department of Agriculture said in its latest Vegetables and Melons Outlook. The preliminary average price in April was 50.7c a lb, up 27% from the March average of 40c and 2¾ times the April 2009 average of 18.4c, according to U.S.D.A. data. Prices averaged 12.2c a lb in 2009 (with a low of 6.99c in March) and 12.5c in 2008 (with a low of 2.53c in March), the U.S.D.A. said.
“The simple answer is the reality of supply and demand,” said Wayne Mininger, executive vice-president of the National Onion Association. “The last six to eight weeks we have been at a supply deficit.” The short supply situation, which sent dry bulb onion prices to “historical highs” from mid-March through April, was the result of adverse weather in several key onion producing parts of the world, he noted.
The storage onion supply, available to retailers and to fresh peeling processors over the winter, is largely harvested in the late summer and early fall and comprises about 70% of annual U.S. onion production. As those supplies dwindle by mid-winter, new crop, or spring, onions first from Mexico, then Texas, California’s Imperial Valley and Georgia supplement the supply until the next fall harvest. This year adverse weather in central and northeast Mexico, south Texas and Georgia delayed and dramatically reduced available supplies, Mr. Mininger said.
Adverse weather in Europe and Brazil also left onion supplies short this winter in those areas, Mr. Mininger said. Exporters in Oceania, notably New Zealand, and in South America, such as Chile and Peru, who are capable of quickly filling onion vacuums globally, chose to fill voids for long-standing customers in Europe and other parts of Asia rather than take on new and uncertain business in the United States, he said. At the same time, Brazilian buyers were paying cash for yet unharvested onions in other South American countries, which also discouraged shipments to the United States, he said.
“It was a combination of very unusual circumstances,” Mr. Mininger said.
Domestic and import shipments of dry bulb onions in the United States totaled 4,497,000 cwts in March, down 7% from February and down 10% from March 2009, according to U.S.D.A. data.
“With average supplies meeting a weather-driven expansion in the export market, fresh bulb onion prices this winter (January-March) began to soar, averaging $22.30 a cwt — up 169% from the relatively pedestrian levels of a year earlier but 582% above the extreme lows experienced two years ago,” the U.S.D.A. said in its Outlook report.
The U.S.D.A. forecast point-of-first-sale onion prices to average 35c a lb in the second quarter, up 57% from the first quarter and more than double the 16.6c average in the same period last year. First-quarter prices averaged 22.3c a lb, up 177% from 8c in the fourth quarter and up 169% from 8.3c in the first quarter of 2009.
Retail onion prices have risen, although much less than at the grower level. The advertised retail price for a 3-lb bag of yellow onions averaged $2.49 (83c a lb) in April, up 61% from $1.55 (52c a lb) in January and 35% above the April 2009 average of $1.84 (61c a lb).
The shortage was a mixed bag for processors. Canners and freezers were able to pull supply from inventory over the winter, Mr. Mininger said, but fresh peeling processors faced the same supply shortage as the retail market. Although statistics are not kept showing how many onions are used by processors, he estimated about 20% of the crop is processed, excluding the specialized California dehydration industry, which uses a different type of onion.
Although onion supplies are beginning to improve and prices are falling as the spring crop becomes more available, the market will be volatile over the next four to five weeks as depleted pipelines are replenished and processor inventories are rebuilt, Mr. Mininger said.
“There will be spurts of adequate supply but no oversupply,” he said. “It will be day-to-day depending on the crop being harvested.”
Soaring prices appear to have done little to entice growers to boost onion plantings this year. The U.S.D.A. estimated area for harvest of fresh market onions during the April-June (spring) period at 25,900 acres in the three major states, up 1% from 2009 but down 4% from 2008 and down 11% from 2007. And area expected to be planted to summer storage bulb onions is forecast to decline 2% in 2010, to 107,610 acres — the lowest since 1992, the U.S.D.A. said in its Outlook report, due to a sharp decline in California plantings. Area in the rest of the country (excluding California), is expected to increase 2%, but the U.S.D.A. expects 2010 yields down 2% from the record high average of 547 cwts an acre in 2009.
“There are several limiting factors” that prohibit farmers from quickly “sliding” into the onion growing business when prices are strong, Mr. Mininger noted. “You can’t just find extra seed,” he said. “And it costs about $4,000 cash per acre to grow an onion crop.”
The U.S.D.A. expects 2010 production of storage onions for the fresh market (excluding California) to rise slightly from a year ago and forecast third-quarter 2010 prices to average 16c a lb, down 54% from the second quarter but still 68% above the 9.5c average a year earlier.
“It’s hard to imagine civilization without onions,” the late chef Julia Child once said. But for a while at least, civilization obviously will have to go on with fewer of the tear-bringing globes.