The pig farming industry often faces a pig glut after the holidays. This is a surplus of animals in a quieter market. The onion sector is already facing a glut just before Christmas this year.
It's a major setback, and it comes at a particularly inopportune time. Just when Christmas shopping is in full swing, sales have suddenly plummeted. Some West African destinations are temporarily unable to cope with the large influx of onions and are postponing new purchases.
These developments are having a direct impact on the entire market. Sales prices are suddenly under pressure, while until recently, sellers were expecting prices to rise steadily leading up to Christmas. Instead of bale prices rising to 26 to 27 cents per kilo, we're suddenly seeing a drop to around 22 cents per kilo.
Consequences for purchasing
The downturn in sales also affects purchasing. A few weeks ago, sorters and packers already bought a substantial quantity, expecting sales to increase rather than decrease before Christmas. The stagnant exports are putting a serious damper on this. Consequently, purchasing has been temporarily halted pending further developments in the export market.
On the other hand, there are growers who are eager to do business before Christmas. In a market where demand is dwindling, this results in additional price pressure. While supply was absorbed very quickly in recent weeks, purchasing has now virtually ground to a halt. A price level of 20 cents per kilo delivered in December had already fallen by the wayside, as more than enough growers wanted to do business. Now, with stagnant sales, 18 cents is proving too high, and the market is dropping to around 16 to 17 cents per kilo.
Whether calm will return after this price drop and the market can quickly recover remains to be seen. With bale prices at 22 cents, the path to recovery isn't suddenly open. First, the oversupplied markets in Senegal, Ivory Coast, and Mali must process the surplus, and then it remains to be seen to what extent customers are willing to purchase planned quantities.
Don't suddenly reduce exports to zero
On the other hand, exports aren't suddenly at zero. Exporters and sorters estimate that exports will drop back to around 30.000 tons this week. Some expect slightly lower, while others expect slightly more than this level. After weeks of over 40.000 tons, that's quite a significant drop.
The setback is also causing companies to maintain even greater reservations regarding purchases for early next year. This is due to the expectation that Senegal will actually close its border to imported onions on January 1st. Nevertheless, some companies assume that a substantial quantity of onions can still be shipped to this West African country in January. This is partly due to the early Ramadan, which begins in mid-February. During and immediately after Ramadan, onion consumption increases. Local production is not yet sufficient to meet this demand.
Hope for sales to Poland
Meanwhile, it's hoped that Poland will provide additional market support. So far, sales of lower-quality onions to this country remain very limited. While there is demand, the prices being offered are far too low for significant sales. Currently, Poles are primarily in the market for bare-root onions. They're only willing to pay 3 to 4 cents per kilo for these. Moreover, for that price, they want large onions and not too much tare weight.
The low prices are currently preventing Dutch companies from supplying larger quantities to Poland. Last year, the Polish onion industry established a solid base in the Dutch market, sending large volumes there. That's not the case for now. Official figures indicate a smaller harvest in Poland (-7%), but this is inconsistent with the very low prices there. Moreover, companies there say they've actually harvested a large number of onions. All in all, Dutch companies are noticing increased interest from Poland at the moment, but they are not yet willing to pay higher prices.
Read here. the explanation from DCA Market Intelligence on the new quotations.