Why onion prices have crashed in Lasalgaon wholesale market

First, some background.

Farmers grow three crops in the bulk: kharif (transplanted in June-July and harvested in September-October), late-kharif (transplanted in September-October and harvested in January-February) and rabi (transplanted in December-January and harvested in March-April). The harvested crop isn’t marketed in one go; farmers usually sell in tranches, ensuring no price collapse from a bunching of arrivals.

The kharif onions are marketed right up to February and the late-kharif till May-June. Both kharif and late-kharif onions contain high moisture, which allows them to be stored for a maximum of four months. This is unlike the rabi onions, which, grown during the winter-spring months, have low moisture content and can be stored for at least six months. It is the rabi crop that feeds the market through the summer and monsoon months, till October.

The current price collapse has primarily to do with a sudden rise in temperatures from around the second week of February. Onions containing high moisture are prone to quality deterioration from heat shock, with the abrupt drying-up leading to shrivelling of the bulbs.

“Normally, farmers would have been selling only the kharif crop now. But the extreme heat this time has forced them to offload even the late-kharif onions, which can no longer be stored. Since both kharif and late-kharif onions are arriving at the same time, prices have fallen,” said Suresh Deshmukh, a commission agent who operates from the Dindori market, which is about 50 km from Lasalgaon.

Tukaram Chavan received a cheque for Rs 2.

How much have prices fallen?

Till February 9, onion was fetching Rs 1,000-1,100 per quintal at Lasalgaon, a price that farmers claim is just above break-even. Prices dropped below Rs 1,000 on February 10 and further to Rs 800/quintal by February 14. They have continued to slide since with the last average traded price, before Monday’s forced shutdown, at Rs 500-550 levels. “Every degree rise in the mercury has resulted in prices tumbling,” added Deshmukh.

Is there any other reason for the drop in prices?

Maharashtra accounts for about 40 per cent of India’s annual onion production of 25-26 million tonnes (mt), out of which 1.5-1.6 mt tonnes is exported. Besides Maharashtra, Madhya Pradesh (16-17 per cent share) Karnataka (9-10 per cent), Gujarat (6-7 per cent), Rajasthan and Bihar (5-6 per cent each) are major producers.

Improved water availability from good monsoon rains this time has induced farmers in MP, Rajasthan, Karnataka and Gujarat to plant onions over a larger area. The influx of the bulb from all these states, together with the forced offloading of the late-kharif crop, triggered the price collapse.

Can the government help?

Dighole has demanded that the government fix a floor price of Rs 1,000/quintal and not allow any purchase to happen below that rate. Further, it should direct the National Agricultural Cooperative Marketing Federation of India Ltd (Nafed) to start procuring.

This comes amid social media flooding with stories of farmers being forced to make distress sales. One that made headlines was of Tukaram Chavan, a grower from Borgaon village in Solapur district’s Barshi taluka. He received a cheque of Rs 2 after the deduction of all expenses towards the sale of his 500-quintal produce at the Solapur wholesale market. This caught the attention of many, with former Maharashtra Deputy Chief Minister Ajit Pawar and other Opposition leaders seeking government intervention.

On Saturday, Nafed issued a statement that it would open procurement centres in Nashik district this week. “Farmers are requested to bring their good quality and dried stock to avail of better rates at these centres. Payment will be made online,” it said, adding that procurement of the rabi onions would begin from April this time.

How effective will these measures be?

As already pointed out, nothing much can be done with the late-kharif onions, which cannot be stored for long. Any effective government procurement is possible only with the rabi crop, which also accounts for roughly 70 per cent of the country’s total annual production.

This crop looks to be in good condition as of now, and farmers have planted 20 per cent more area compared with last year. The buffer stock to be created from Nafed’s procurement of rabi onions should ensure no tears for either farmers or consumers in the months ahead.