Onions are a staple ingredient in any kitchen, but this year the global market will have its work cut out to meet demand as production conditions in the major supplying countries have conspired to cause a worldwide shortage.
The British season is still only halfway through, but the major players are keeping a close eye on key southern hemisphere sources - New Zealand, Tasmania and Chile - ahead of their short but crucial window to the UK.
In fact, prices for southern hemisphere supplies are likely to be high in the coming months, following the global downturn in production. This comes against a background of rising prices and increased shipping costs, a slip in the exchange rate and a shortage of larger sizes.
Kantar Worldpanel figures for the year to 26 December 2010 confirm that prices are on the up, with value sales up 11.6 per cent to £208 million. At the same time, volume sales nudged up by just 0.4 per cent.
The first arrivals of counter-seasonal lines are expected to hit the UK this month and the window for southern hemisphere exporters is likely to be longer than normal. So far, the main sources are still struggling to pin down their numbers and reports of German retailers switching to Argentina for onion supplies have been taken as an indication that the market will be unpredictable in the coming months.
Robert Oldershaw, director of Oldershaws of Moulton, insists that “another global shortage” is set to hit the onion category and “market prices are likely to be very strong”.
Suppliers are bracing themselves for tricky trading, in the face of the many challenges facing the category this year. However, many admit that it is still too early to tell exactly what the market can anticipate as supplies switch to the southern hemisphere. It is thought that New Zealand prices could rise by as much as 20-30 per cent, while Chilean pricing is also forecast to be higher but not to the same extent.
David Noton, group director at Nationwide Produce, insists that price is going to be a “big issue with retailers” and that “we could potentially see pricing well in excess of £1 per kilo”.
Jonathan Tole, business unit director at Rustler Produce, agrees that prices will step up from last year as a result of “the way the world market is”.
“At the moment, the crop is tight and there is little surplus high quality product around,” he says. “UK growers themselves have managed difficult conditions last year and have reasonably good quality crops in store. There have been yield reductions and some stores have quality issues but in terms of what we require, it is tight and prices are up in the UK and across Europe.”
The way southern hemisphere exports will play out will depend on what happens with the home-grown offer, which is still coming through a tough season.
“Generally, the suspected quality issues relating to staining are not as bad as first suspected, but it is too early to say what the long-term storability is going to be like,” says Oldershaw. “There is certainly a shortage of large onions this year but on a positive note, overall volume is still increasing despite the dramatic reduction in value pack sales.
“Due to last year’s dry summer and wet harvest, generally crops are smaller on average and there is an amount of staining on certain crops. Having said this, the crop is mostly holding up well at the moment. The prospects for next year and beyond are good.”
All eyes are on the major southern hemisphere sources as the main players try to work out what they can expect this year.
New Zealand is a popular choice for UK retailers but growers are reporting that volumes have been slashed by a quarter and in some areas, up to 40 per cent on last year. At the same time, sizes will be smaller than last year and anything above 70mm will be scarce and expensive. In fact, the country has had a very similar season to the one the UK had last summer. A wet spring pushed back planting, then a dry period made things difficult because the majority of growers do not have irrigation. The early long keeper (ELK) varieties are seeing yields of only about 12-14 tonnes per acre, so tonnages will be reduced even though overall plantings were up by six per cent on last year. The later varieties are still to be harvested, but many fear the rain came too late to improve the offer.
Tasmania is expected to divert more volumes to Australia, where demand is high. Chile replaces the Spanish crop but even though plantings are reported to have doubled, the crop is expected to be smaller than normal. South African sendings will come in first to plug the gap between Spain and Chile.
Gary Mac-Fall, who works in European sales for the New Zealand Onion Company, admits that growers and exporters are “under a lot of pressure” to commit to programmes but they cannot yet foresee how the offer will pan out.
“There are few years when everything seems to be going wrong but this is one of them,” he says. “We know that we are going to be short of 70mm-plus material. The UK could do with more imports than it normally gets, but New Zealand growers and exporters are not sure what they will have or what prices will be.
“One hurdle is the exchange rate compared to last year, which means that when we come to selling prices we are looking at an 18 per cent increase just to stand still and that’s before we go into shipping costs, not to mention the poor yield that we have had.
“It’s tough, but a balance has to be reached and we want to come up with a price that is fair all round.
“New Zealand is not as big a part of UK programmes as it used to be and because of that, growers and exporters have to value the customers they have,” he continues. “If your window of sales opportunities is shrinking, do you take advantage of a short season or try to keep that window open and keep the business in the long term?
“It has to be about shipping quality over volume, as that is an issue that New Zealand growers have had in the past.”
All in all, importers will have to negotiate their way through the coming months in a way that they have not had to do for some years in order to secure the product they need. Time will tell how much prices will rise by, but it will take initiative and a fresh approach to make this market work for them until they can switch back into UK supplies.
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