Onion Prices Expected to Soar to Rs 60-70/kg in September, Supply Crunch Predicted

Onion Prices Expected to Soar to Rs 60-70/kg in September, Supply Crunch Predicted

Onion prices in the retail market are set to rise towards the end of August and are predicted to reach Rs 60-70 per kilogram next month due to limited supplies, according to a report by Crisil Market Intelligence and Analytics. However, the report assures that the prices will still be below the high levels witnessed in 2020.

The report explains that the imbalance between supply and demand will begin to impact onion prices by the end of August. It anticipates a significant increase in prices from early September, with rates potentially reaching Rs 60-70 per kilogram during the lean period. Nevertheless, the report emphasizes that prices will not reach the heights observed in 2020.

The reduction in the shelf life of rabi onion by 1-2 months, coupled with panic selling in February-March this year, is expected to lead to a significant decline in rabi stocks in the open market by the end of August, instead of in September. This extension of the lean season by 15-20 days is likely to result in tightened supplies and higher prices for consumers.

The report suggests that onion supplies will improve once kharif arrivals begin in October, leading to a softening of prices. It also states that the price movement during the festive months of October to December is expected to stabilize.

Earlier this year, a decrease in onion prices from January to May provided some relief to consumers who were facing higher costs for cereals, pulses, and other vegetables. However, this decline created a negative sentiment among onion farmers for the kharif season, resulting in an 8% decrease in acreage and a 5% year-on-year reduction in kharif onion production. Despite lower kharif and rabi output this year, a major supply crunch is unlikely. However, the development of onion crops will depend on rainfall in August and September.

In conclusion, the report highlights that while onion prices are anticipated to increase in the coming months due to tightened supplies, they are expected to remain below the levels recorded in 2020. The situation is unlikely to result in a severe supply crunch, but the performance of the onion crop will depend on the rainfall received in the months ahead.