Onion prices fall on good monsoon rain

PUNE: Onion prices, which are driven more by sentiment than fundamentals, declined last week although some leading traders believe they may rally in September-October. Prices fell last week after a satisfactory start to the monsoon, lower overseas demand due to Ramadan and rumours about imports from Pakistan, even before the government increased the minimum export price to $425 (Rs 26,968) a tonne on Friday to discourage exports.

Average monthly wholesale onion prices at Lasalgaon agricultural produce market committee (APMC) in Nashik district had increased to Rs 16/kg in June from Rs 12/kg in May. However, wholesale onion prices dropped by Rs 2/kg over the past 10 days mainly due to a decline in exports due to Ramadan and the timely arrival of rains. “Exports had come down significantly since the beginning of Ramadan,” said Danish Shah, a partner at Sanghar Exports.

The increase in the minimum export price (MEP) makes onions almost on par with rates overseas.

“For the first time, the ministry has taken into consideration the prevailing export price for fixing MEP. Considering the export price of about Rs 20/kg and other costs like transport, the hike in MEP is reasonable,” a government official said, asking not to be identified.

The timely arrival of monsoon rains has significantly affected prices. The major kharif onion growing states of Maharashtra, Karnataka, Gujarat and Rajasthan have received good rainfall.

“Sowing of kharif onion in these states is expected to be more than last year,” said RP Gupta, director of the National Horticulture Research & Development Foundation in Nashik.

The past year’s good prices may encourage onion farmers to stay with the crop. Farmers received an average of Rs 13/kg during the past one year. Timely sowing will also mean that the kharif crop will come to the markets on time and stored stocks will start dwindling.

The condition of the early sown crop in small pockets of Karnataka and Andhra Pradesh is reported to be good. “Onion situation looks to be under control now as compared to what we were expecting two months ago,” said Ajit Shah, chairman of the Onion Exporters’ Association.

Another reason for the decline in prices at Lasalgaon was a rumour that spread on the WhatsApp messaging service about onions being imported from Pakistan.

“Many traders asked me about it in the past few days. They were reluctant to send their stocks forward fearing that prices would crash,” said an office bearer of the Lasalgaon APMC.

However, a section of traders believes that a rally in onion prices is inevitable this year. “Wholesale onion prices will hit Rs 35/kg to Rs 40/kg in September-October,” said a leading wholesaler from New Delhi.