Drought in India Raises Prices for Dried Onion and Garlic

India relies heavily on rainfall for its water supply: more than 50% of India’s arable land relies primarily on rain for water. However, according to the data from the India Meteorological Department, the country has received 24% less rainfall during the first six months of 2019 compared to the 50-year average. This has caused a drought in India, which has significantly affected the supply and production of basic agricultural crops such as onion and garlic.

Kirti Foods Pvt Ltd, a dehydrated onion and garlic producer/exporter from the Gujarat region in India, uses local fresh onion and garlic and processes them into dehydrated products. The company exports to Europe, Africa, and South America. According to Ramji Valiya, the export manager at Kirti Foods Pvt Ltd, the drought in India has drastically increased the prices of his raw materials - fresh onion and garlic. Compared to 2018, the price of fresh onion in 2019 increased from 5 INR to 11 INR per kg and the price of fresh garlic increased from 7 INR to 12 INR per kg. This represents a 120% increase for fresh onion and a 71% increase for fresh garlic. Although the company could import fresh onion and garlic to avoid such drastic price fluctuations, the company stated that it will continue to source its raw materials locally due to the relationship the company has with the local farmers.

Due to the sharp rise in input prices, Kirti Foods Pvt Ltd expects to increase the export prices of its dehydrated onion and garlic. Compared to prices in 2018, the price of dehydrated onion is expected to increase from 70~85 INR per kg to 125~135 INR per kg, representing a 68% price increase. On the other hand, the price of dehydrated garlic is expected to increase from 45~60 INR per kg to 100~120 INR per kg, a 110% increase. Although dehydrated onions saw a bigger increase in the cost of raw materials, dehydrated garlic will see a bigger increase in final prices, as the demand for dehydrated garlic is much higher than that of dehydrated onion. 

According to Kirti Foods Pvt Ltd, the prices for dehydrated onion and garlic would not change even if the country recovers from the drought, and the prices of raw materials would go down. Since the season for fresh onions in India is from December to June and for fresh garlic is from January until March, all the fresh onion and garlic intended for processing have already been purchased. However, if the prices of fresh onion and garlic recover from the drought next season, it is expected that the price of dehydrated products will go down again.