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ONIONS - THE MOST DIFFICULT CROP TO FORECAST

Tim O'Malley, Group Managing Director, Nationwide Produce PLC - The Vegetable Farmer May 2010

It’s reassuring that I’m not alone. Back in October, the cream of the UK onion industry gathered once again for a committee meeting of British Onions (a long established and well respected trade association doing a commendable job of promoting the domestic crop). Bearing in mind the date (post harvest), I think we were all expecting a fairly accurate assessment of the season ahead.

Looking back now at the minutes of the meeting the overall consensus was that the UK onion job was going to be oversupplied and prices disappointingly low. We had good reason to come to this conclusion. Yield was expected to be slightly above average as we’d had a pretty good growing season.

The main crop harvest had been exceptionally good as it had been one of the driest on record. Therefore, crop going into store was dry and clean as a whistle, so expectations, were that pack-out yields would be high, which has proven to be the case.

Overall UK production was expected to be around 400,000t which is about average. The two main onion producers in Europe, Holland and Spain, were expected to both have healthy crops of over a million tonnes each and Polish production expected to be around 700,000t. Prices at the time were depressed on the back of a bumper early set crop.

It all seemed to be pointing to a disappointing year. In March last year the average price was £120/t which is about the norm for this time of year. And yet, as I write this article on 23rd March, with at least two months of the season ahead of us, spot market prices for bulk, 60mm+ industrial onions are heading towards £350/tonne. Why?

Whether we like it or not the Dutch call the shots for the onion job. They have by far the largest and busiest port in Europe and are huge exporters of onions around the World—therefore they tend to set the price. The Dutch grow over a million tonnes but consume only around 100,000t. By comparison, we grow 400,000t and consume around 700,000t.

In broad terms we make up the shortfall every year with approx 100,000t fairly evenly spread across Poland, Chile and New Zealand.

The Dutch have exported onions to Africa for years but this year the demand has been exceptionally strong, particularly from Senegal due to a growing population and economy and also better infrastructure. Last year the Dutch had a disappointing demand from Russia. This year the Russian demand has been strong mainly because Poland & Ukraine, traditionally large exporters to Russia have struggled.

Ukraine’s production was below average this year and in Poland temperatures plummeted in January to as low as –34°C. At that level everything grinds to a halt and the irony is that the Poles started to import from Holland also. But perhaps the biggest surprise importer this year came from South America—Brazil to be precise. Rumour started to spread in Onionsville that Brazil had lost around a third of its crop due to heavy rain.

Now this is a country with a population of 200 million and onions are a key ingredient in their national dishes. Spain and Holland soon spotted the opportunity and started to export to Brazil. New Zealand prices are much higher than last year not just because they have strong demand, but also because of the weak New Zealand dollar.

And there lies the problem with trying to predict the onion job. It’s a truly global commodity. The fact is the onion travels better than any other vegetable. You can stick an onion on a boat and sail it half way around the world from NZ to UK an it will generally arrive in excellent condition.

So, if one part of the world is short, then another part of the world (usually Holland) is there to fill the gap. By comparison, potatoes are a lot easier to forecast. The potato doesn’t travel so well and we are a lot more self sufficient and because it doesn’t travel well, the chances of forecasting wide of the mark are slimmer. Most people in the potato industry predicted the spud job would be over-supplied this season...and they were right.

There is another key factor for why onions are so difficult to forecast. Onions are an irreplaceable base ingredient. If some guy in remotest Brazil was short of potatoes do you think he’d pop his head above the rainforest and scream “get me some spuds now at all costs!” No. He’d buy rice and pasta instead. Onions are an essential ingredient and frankly whether they cost £50/t or £400/tonne (for UK industrial onions). The truth is you'll only ever get anywhere near an accurate forecast of the onion job if you have detailed data to hand of onion supply an demand for every corner of the globe.

We monitor spot prices on a monthly basis and to highlight the folly of trying to forecast the roller-coaster ride that is the onion job, (see graph). The humble onion—undoubtedly the most difficult vegetable crop of all to forecast!