Volatility in onion market

According to a recent report published in this newspaper, the country’s onion market has become unstable due to various reasons including production shortage, slow-moving policy of farmers, increase in prices due to many exchanges of hands and import halts.

The onion prices have increased by Tk 20-25 per kg in the last two weeks. According to the Trading Corporation of Bangladesh (TCB), the price is currently 78 per cent higher than the previous year. Consumers are worried about the increasing prices ahead of the upcoming monsoon and Eid-ul-Adha.

The yearly demand for onion in Bangladesh is about 27 lakh tons. Considering the domestic production to the tune of 26 lakh tons, the yearly requirement will be to the tune of 34 lakh tons assuming 25 per cent of the produces gets wasted as perishable products. Now there are silver linings in these statistics. If we can reach the production target of 34 lakh tonnes, Bangladesh may attain an autarky position in onion. According to the Department of Agricultural Extension [DAE], the yearly production in 2020-21 is about 32.66 lakh tonnes. Bangladesh is now ranked third in the world, surpassing the United States. Surprisingly, we are very close to self-sufficiency in onion production and consumption. The country experienced a shortfall in the near past and needed to import onion to the extent of five to six lakh tonnes.

On a positive note, the DAE asserts that farmers are now cultivating a high-yield variety of Murikata onion, a ladder to reach self-sufficiency in terms of onion production, and believes Bangladesh needs not to import onions and that the home market will not get destabilized once Murikata is produced across Bangladesh. Its yield will come to around 20 tonnes per hectare.

When domestic production is not sufficient to meet domestic demand, the deficit may be addressed through a pragmatic import strategy beneficial to both the producer and consumers with a tolerable margin of price variation in case of any emergency. The exporters should pursue a conciliatory policy to help the importing country manage the scarcity.

An IFPRI (International Food Policy Research Institute) study recommended reducing dependence on a single source by importing onion from alternative sources such as China, Egypt, Malaysia, Myanmar, Pakistan, Turkey, and Vietnam. Another recommendation was that imports should be made carefully assessing their impacts on local prices so that price reduction does not become a disincentive for Bangladeshi farmers to produce onion. The IFPRI said the authorities should be vigilant against speculative storage between September and December when Bangladesh is most dependent on onion imports. To increase domestic production, the recommendation was made to ensure the supply of high-quality inputs - particularly seeds, fertilisers, and pesticides - to farmers promptly.

Many believe the price hike of onion was an irrational act, orchestrated by a market syndicate. The National Board of Revenue (NBR) have in recent years claimed to have information about imported onions being hoarded illegally to create an artificial market crisis. Allegations of money laundering in the name of onion imports were also there. Experts have stated that the onion stock in the country was enough and there was no rationale for such a crisis.

The crux of the issue is in the modus operandi in both input and product marketing. Market syndication is the bane that devours all the positive gains in this complex syndrome. The government needs to focus also on the storage and the dubious connections between the wholesale and retail markets.