Trust, it comes on foot and goes on horseback goes the saying. This expression also applies to the onion market at the moment. After the correction last week, players in the market have to get used to this new reality. The basis is solid, but the leaps and bounds of the past few weeks, first up and now down, have taken a blow to confidence in the market.
The bottom of the onion quotation on the regional exchanges is €65 per 100 kilos. That is a price level that has rarely or never been seen and we sometimes want to forget that when we talk about the onion market. But in the long term, onions have also been traded at €100 this season, so from that point of view it is not surprising. And that is also where the major bottleneck lies in the onion market. Last week there was pressure from trade and sorters who had agreements with growers where the onions had to be collected before April 1. This is still reflected in the bale price because sorters have now sorted the onions and a buyer must be found for the finished product. At the same time, the time to collect the most expensively purchased onions of the season is also getting closer. Several sorters have done business for €100 on April delivery. It's just a matter of how you calculate (average value of the stock or whether your purchases and sales are directly offset against each other), but no matter how you look at it, the price of those lots does not match the current bale price at all. The first week of April is already over, so it is doubtful whether it is realistic to get the bale price above €100 in three weeks.
Huge price gap
With such a gap of approximately €25 between onions purchased in the long term and the day market, conflicts about the settlement of existing agreements are likely to arise. Various buyers and sellers screen the contracts once more to be sure or have them do so. An error, ambiguity or minimum quality requirements, whether or not in a gross/net contract, can cost or generate a lot of money for both buyer and seller. This also applies to the participations. What to do with the onions that were delivered in the weeks when Emmeloord did not have a price on the board?
Being in two minds and not knowing which way the onion market will turn is also evident in the DCA quotation Bale price of Onions. The price range was already wide and has become even wider this week. One sorter has stock that needs to go and dares to drop significantly to get rid of it quickly, while another sorter is higher in the market and then accepts that fewer onions are being sold.