Indian Government Lifts the Onion Export Ban After Three Months

India lifts ban on the export of onions after three months

The Indian government originally prohibited exports of onions from the month of September to protect its domestic market amidst supply shortages and rising prices. With the Kharif onion crop coming into the market during the last quarter of 2020 the price fell down by approximately 65%. The prices have followed a downward trend since October as the supply continued to grow. Recently, the government has made a decision to reopen the trade gate with the judgment that the price has now fully stabilized.

Early lifting of the export ban exceeds market expectations

Initially, it was expected that recovery in the supply of onions might not last for a long time as the onions from the Kharif crop will not be sufficient to fulfill the demand. The lack of supply was expected to inflate the prices as it had before September and remained to be seen when the ban could be lifted. A similar situation was seen in 2019 when the government banned onion exports in 2019. The ban was placed in the month of September after a bad crop crimped output. The ban was in place till March 15, 2020, after which the government was able to finally lift the ban as prices fully stabilized. Therefore, for this time as well, it was anticipated that the prices would follow the downward trend for a long time. Despite the speculation, the government has decided to reinitiate exports as prices stabilize in a brief period of time.

Wholesale Price in Lasalgaon, Maharashtra

Source: Tridge

Bangladesh, Sri Lanka, Malaysia, and Nepal will be affected

India's early return to the global onion trade market might result in a drop in import prices as India has a fair share of 16% in the volume of global onion exports. In particular, Malaysia, Bangladesh, Sri Lanka, and Nepal are the countries that would be immediately affected as they heavily rely on India to support their onion demands with import shares from India of 55%, 92%, 95%, and 99% respectively.

Source: Tridge

Sri Lanka's wholesale price quote immediately plummeted by as steeply as 30% when India announced that the onion export ban will be lifted in the coming week. According to a Tridge’s partner in Sri Lanka, the average price of onions per kg was around at 90 LKR level, but as soon as the plan to lift the ban on January 1st was released, 2021 buyers bid fell down to 55-80 LKR level which is 30% less on average. As the reliance on the Indian onions applies similarly to the other three countries, a similar downward trend in the prices is expected.

Pakistan

It was expected that Pakistan would strongly benefit from India's export restrictions. With similar geographical accessibility as India, Pakistan has similar export destinations such as Malaysia, Sri Lanka, UAE, Bangladesh, and Qatar. Therefore, although the official trade statistics of the alternate demand toward Pakistani onions since this year's export ban from these countries have not yet been fully accounted for and released, it is still expected that the numbers must have risen for the Pakistani onion. A similar trend was seen in the 2019 onion export ban during which the Pakistani onions saw a demand surge of +900% for the aforementioned countries until the end of the year.

Source: Tridge
Note: Countries included are Malaysia, Sri Lanka, UAE, Bangladesh, and Qatar

Wholesale prices in Pakistan are still about +30% as high in comparison to the period before the export ban was imposed. Immediately after India's export ban in 2020, Pakistan's wholesale prices of onions had risen up to the USD 0.36/kg level (+80%) in a month and then marginally stabilized downward, dropping down to USD 0.25/kg level in December. The average wholesale prices of Pakistani onions were spotted at USD 0.17/kg on September 14, just a day before the imposition of the export ban.

Wholesale Price in Multan, Pakistan

Source: Tridge

Immediate downward pressure on Pakistani onion prices spotted

It remains to be seen how big of an impact the lifting of the export ban will bring about for the Pakistani onions, but the price will surely move downwards. When the export restriction in 2019 was lifted in March of this year, the price has plummeted from USD 0.35/kg to USD 0.08/kg in mere three months. Although the duration of the export ban is shorter this time, an immediate drop in prices has been already spotted. According to Tridge’s Partner, "bidding price for Pakistani Onions has dropped as steeply as 30% in a single day after the news was released. Traders who have procured the onions expecting that the ban will surely take place for a longer period of time are already expressing great losses.”