Onion prices likely to rise 100% as erratic rains delay harvest: Crisil

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September 10, 2021 8:14 AM

The delay in arrival of the kharif crop and shorter shelf life of the buffer stock because of Cyclone Tauktae may result in a rise in prices, says a research note from Crisil.

onion pricesOn an average, India consumes an estimated 13 lakh tonne of onion every month.

Prices of onion are likely to go up substantially, with an erratic monsoon leading to an eventual delay in the harvest. The delay in arrival of the kharif crop and shorter shelf life of the buffer stock because of Cyclone Tauktae may result in a rise in prices, says a research note from Crisil.

Crisil said: “The trend of the past two years shows untimely rains in August-September hampered onion harvest, and prices doubled compared with 2018 when conditions were normal. Crisil Research forecasts an increase of more than 100% in onion prices this year. Prices are expected to cross Rs 30 per kg for kharif 2021 because of the challenges faced in transplanting the crop in Maharashtra, though this will be slightly lower on year to (1-5%) on a high base of kharif 2020.” The note also said natural calamities have increased moisture content in the stored rabi crop, thereby shortening its shelf life. This is expected to prepone the arrival of stored rabi crops before the lean season, adding to supply woes.

On an average, India consumes an estimated 13 lakh tonne of onion every month. The crop is grown in three seasons: kharif, late kharif and rabi to meet this demand. This makes onions available for most of the year. Maharashtra, Karnataka and Andhra Pradesh are major kharif onion-producing states, contributing over 75% of total kharif onion production.

The bulb’s supply and price dynamics are dominated mainly by climatic conditions, especially the southwest monsoon. While rabi onion contributes to 70% of the total production, the kharif crop plays a vital role in maintaining supply during the lean period of September-November.

According to Crisil, during the corresponding festive season last year, onion prices had doubled compared with the normal year of 2018 – mainly due to supply disruption caused by heavy and erratic monsoon that damaged the kharif crop in Andhra Pradesh, Karnataka and Maharashtra.

The fluctuating monsoon is expected to pose challenges in transplanting the crop in Maharashtra, which accounts for 35% of the total kharif onion produced in the country. “With Nashik, which contributes 37% of the Kharif onion produced in Maharashtra, facing a rainfall deficit of 33% as of 30th August, followed by Pune, which contributes 13% of the Kharif onion produced in Maharashtra, many farmers, who had set up nurseries in anticipation of good returns have been unable to transplant owing to the erratic monsoon. This is likely to delay the process and may result in late arrival of the onion crop, thus widening the supply-demand gap during the lean months of September to November,” the Crisil note said.

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