W28: Onion Update

In W28 in the onion landscape, it was reported that the French onion market is showing signs of recovery after facing supply shortages for several months. European countries are gradually increasing their onion production, leading to market rebalancing. The French onion production has begun with moderate volumes. Spain, the most prominent origin on the market, experienced a production deficit due to unfavorable weather in May and June, resulting in higher prices. However, prices expect to return to normal levels by August. Furthermore, onion and garlic exports in the Spanish community of Castilla-La Mancha anticipate failing to reach the expected volumes due to drought and hailstorms. The red onion harvesting operations in Acquaviva delle Fonti, Italy, began with a 15-day delay compared to the previous season due to significant phytosanitary challenges caused by excessive rainfall in May. The incessant rain led to fungal issues, impacting plant growth and bulb development, reducing yields by up to 40%. To compensate for defense treatment expenses, quotations for the onions are 12 to15% higher than the previous year. Despite the delayed start, the campaign might end early due to active harvesting and demand in the market.

New Zealand and the European Union (EU) have recently signed a free trade agreement, offering significant benefits to New Zealand's exports, particularly in the onion, kiwi, and apple sectors. The agreement expects to boost the two entities by an estimated value of USD 1.8 billion, with immediate removal of duties on 91% of goods shipped from New Zealand to the EU. Within seven years, this percentage is projected to reach 97%, resulting in an annual tariff saving of about USD 100 million. The Ministry of Agriculture of the Russian Federation has suggested that a reduction in onion prices is projected soon, coinciding with the commencement of mass harvesting in Russia. The statement comes in response to the recent rise in onion prices, with the average cost reaching USD 0.81/kg (RUB 73.3/kg) rubles per kilogram in May-23, representing a 9% increase compared to the previous month's price of USD 0.74/kg (RUB 67/kg). In addition, in the Russian wholesale market, onion prices have experienced a significant and rapid increase, with current prices exceeding USD 0.77/kg (RUB 70/kg), a notable escalation compared to the price fluctuations of the past decade, at an average of USD 0.33-0.44/kg (RUB 30-40/kg).

On the other hand, the South Korean government has announced plans to implement tariff-rate quota (TRQ) imports of 90 thousand metric tons (mt) of fresh onions in the second half of 2023 to stabilize prices. If all planned imports are fulfilled, TRQ imports are expected to exceed 110 thousand mt. There are concerns that this increased import volume may lead to market erosion caused by Chinese onions. The decision to raise the TRQ amount is due to the notable decrease in mid-late onion production compared to 2022, mainly due to disease occurrences resulting from adverse weather conditions in late April and early May.

Lastly, Uzbekistan has experienced a significant increase in onion exports since lifting restrictions on March 15, 2023. Over the past three and a half months, 222.8 thousand mt of onions have been shipped to foreign markets, marking a 53% growth compared to the previous year and a 40% increase from the same period in 2021. The primary buyers of Uzbek onions are Kazakhstan and Russia, which account for nearly 90% of total exports. After a notable decline in onion prices from late May to mid-June, prices have stabilized over the past three weeks. In the Latvian market, Uzbek onions stood at USD 1.43/kg (EUR 1.29/kg), while the wholesale price in Uzbekistan remained stable at approximately USD 0.21/kg (EUR 0.19/kg).