Pakistan Onions Set to Benefit from the Indian Onion Export Ban

Published Oct 23, 2020

After the Indian government imposed a ban on onion exports in September, the demand for Pakistani onions has allegedly started to increase in the international market along with the export price. As Pakistan once saw its onion exports skyrocket during the fourth quarter in 2019 with an Indian export ban, the country is expected to see its export numbers rise again this time.

The Export Ban on Onions Imposed by India

In September 2020, India prohibited exports of onions to protect its domestic market amidst supply shortages and rising prices. India's key onion-producing states have received as much as 41% more rainfall than average since the monsoon season began on June 1, which has damaged the crop and delayed its harvest in others. Wholesale prices in India's largest onion trading hub, Lasalgaon, had nearly trebled in a month to RS 30,000 (USD 408.52) per MT due to supply shortage, and the government was concerned that the staple crop would be subject to significant inflation. The ban included all varieties of onions produced in India and was put into immediate effect on September 15.

Marginal Relaxation on the Regulation Not Necessarily a Sign of Recovery

There has been some marginal relaxation of the export ban due to the crop's significance to the neighboring countries that rely heavily on Indian exports. India allowed the export of 10K MT onion with several conditions on October 9. However, these conditions, including exporting onions through waterways, have proven to be very unpleasant amongst the traders as they are not familiar with the routes and could pose risks to the quality of the crop due to the length of shipment.

Also, given that the number of total onion exports of India amounted to 1.5 million MT in 2019, the mere 10K MT size of the export quota granted is considered a friendly political gesture to importing countries rather than a sign that India will reopen exports again. The wholesale price of onions in India is still skyrocketing, marking 0.64 USD per kg on October 19, a 256% increase since the export ban on September 15, and the new harvest which would normally stabilize the prices has yet to arrive.

The wholesale price of onions in Lasalgaon, India

Source: Tridge

The rise in demand for Pakistani Onion in the International market

As more time is needed for the Indian exports to be normalized, Pakistani onions have been experiencing a rise in international demands. India and Pakistan, due to their geographical proximity, have been exporting to similar countries. Malaysia, Sri Lanka, the United Arab Emirates, Bangladesh, and Qatar combined accounted for 86% and 65% of total exports for Pakistan and India, respectively, in 2019.

Source: Tridge, Trademap

These major importing countries are reportedly ordering more onions from Pakistan with the absence of Indian onions, just as they did in the last year when India imposed an export ban on onions in an attempt to secure domestic supplies. The aggregate imports of the five countries for Pakistan onions last year had surged 900% from September to December when the previous Indian ban was in effect. The wholesale price in Multan, Pakistan increased by more than 30% from September to November at the peak of India’s ban.

The Wholesale price of Onions in Multan, Pakistan

Source: Tridge

Note: wholesale price increased by 35% during September-November in 2019

Last year's ban lasted until February as onion prices did not stabilize even with the new crop harvest in November 2019, thus anticipating when the ban could be lifted this time could also be hard to predict. However, the Pakistan players will surely benefit this time as well, and the longer the ban lasts, the more upward pressure will be put on Pakistan onions. The wholesale price of onions in Multan, Pakistan, has already risen by 80% since the export ban, and it remains to be seen how far the price could increase this time.

Sources