During the first half of the marketing season, the Dutch onion chain was able to utilize its enormous processing capacity effectively. Large quantities were exported at record speed. However, this capacity is now hindering sales somewhat. Companies are now operating at half capacity or even less, and to stay afloat, they are adjusting prices.
According to various sources, the Netherlands isn't selling an extra kilo of onions by lowering prices. In fact, sales are sluggish in this declining market. Buyers are afraid of overpaying and are waiting as long as possible to purchase new shipments. They're first using up their stock and then assessing what's absolutely necessary. This development is slowing down sales, which had been going so smoothly until now.
Until just after New Year's, there was high demand from abroad. However, some major African buyers are now withdrawing to protect their own onion sector from imports. Senegal closed its border in mid-January, and Gambia will close on March 1st. This latter fact effectively means that no more onions can be shipped to the country at this time, due to the time it takes for ships with containers to dock there.
The market closures aren't new; they were largely known in advance. Sorters, packers, and exporters had known for months that demand would halve in January due to the withdrawal of major customers. This isn't new this year either; it happens every year. However, the question remains how many onions these buyers will still purchase in January.
However, Dutch processing capacity remains high. While temporary workers can be shifted around, the machines are there all season. To keep the machines fully utilized, companies compete for the last few sales, and then it's a matter of who's willing to lower their prices the most.
DCA Market Intelligence has decided to adjust the calculation and publication of the DCA Bale Price starting this week (week 5). Starting this week, a single price will be published for each grade. The publication of this average price replaces the current method of listing a range of minimum and maximum prices (from/to) for onions.
The DCA Bale Price calculation will also be adjusted. According to Eric de Lijster, Head of PRA at DCA Market Intelligence, these changes align with market developments and the company's internal policy. "Our DCA Bale Price quotations are compiled from price input from Dutch yellow onion trading companies. We've noticed for some time that they are increasingly reporting average prices instead of from/to prices. Therefore, it's a good time to align the DCA Bale Price with this trend and start publishing average prices," says De Lijster.
DCA Market Intelligence already uses the standard deviation method to calculate average prices for all its other quotations, including dairy, pig, and manure. This more standardized method will also be applied to bale prices starting this week. "This allows us to harmonize all our quotations according to a single calculation method, allowing us to work transparently and consistently," explains De Lijster.
The price range for bales won't disappear completely. With the publication of the new average price for packaged Dutch onions, DCA Market Intelligence also publishes the price range used to calculate the quotation. "This way, our clients continue to have a clear overview of the price range and therefore also market movements," concludes De Lijster.
The DCA Baal Prize is published for subscribers on Boerenbusiness.nl and on the market information platform of DCA Market Intelligence.
Bale prices partly down
We're also seeing the DCA Bale Price for Onions decrease this week. However, there are differences between participating companies in these quotations and also between the different sizes. Some companies processed slightly larger batches last week. As a result, they have slightly more large sizes to sell and fewer very fine ones. Consequently, the increased supply of large onions is causing prices to drop slightly, while on the other hand, they are experiencing a shortage of finer onions. Companies with ample supply of finer sizes are trying to sell these onions faster, as they want to reduce their stocks due to declining sales in Africa.
For the 40-60 millimeter size, most companies are charging prices of 18 to 19 cents per kilo. Prices for the 50-70 millimeter size range primarily between 18,5 and 20 cents per kilo. Most companies are reporting prices for the medium size of 18 to 19 cents, bringing the average this week to 18,5 cents.
Large onions are generally selling for 21 cents per kilo. Sales to England appear to be a bit more difficult, as they received a relatively large volume there in recent weeks. In week 2, more than 4.000 tons were shipped there, and considerable volumes were also sold in weeks 3 and 4. To clear out stocks, demand appears to be slightly lower this week. This makes prices of 22 and 23 cents per kilo more difficult to achieve.
Supermarkets quote around 25 cents per kilo. Some are slightly lower, while others are asking a bit more. For triplet sizes, the price also varies somewhat. Quotes range from 13 to 16 cents at the low end to 19 to 20 cents at the high end. This is mainly due to how much stock the companies have in this size and the sales opportunities they have for this product. Companies with excess stock keep the price down, while those with limited stock charge a bit more.
Read here the explanation from DCA Market Intelligence on the new quotations.