The onion sector as a whole is experiencing what could be its worst season for decades - and arguably centuries.
The weather took its toll on the UK crop as far back as May, when cold weather slowed early canopy growth. Following this, the hottest, driest July since 1689 meant plants stopped growing altogether. In a bid to mitigate the drought’s effects, growers subsequently stepped up irrigation schedules but, overall, UK yields were stunted. The downpours that followed in August caused yet more problems - some areas recorded rainfall of up to 10 inches - and while the precipitation took the edge off some of the dry weather’s impact, it has caused problems with skin staining and storability.
One month on, growers are still waiting to measure the weather’s full effect on crop availability and quality, but, even at this early stage, they are suggesting a very challenging period ahead.
The industry is certain about one thing - that supply will be tight over the coming months. Demand for home-grown crops in the UK stands at around 380,000 tonnes, and the impact of the weather will see UK supply short by 30-40,000t, although where and who feel the worst impact depends on soil type and irrigation, experts say.
With the harvest finally ending after a delayed start, it will take two to three weeks to get an understanding of what is in store and, in a month’s time, a true picture of availability will be clear.
“The only saving grace is that it is an industry and European-wide problem, which should help to get some much-needed inflation to the market,” says Jonathan Tole, product and technical director at onion specialist Rustler Produce Ltd and vice chairman of the British Onion Producer’s Association (BOPA). Rustler - part of the Produce World Group - grows and markets 30,000t of red, brown and sweet onions for pre-packing, which are supplied into foodservice, processing and retailing markets.
According to figures, mainland Europe has taken the brunt of the conditions. Yields across the continent will be severely receded - down by 15-20 per cent in western Europe and significantly worse in eastern European countries, such as Poland, which will see yields crushed by 40-50 per cent.
While the area of onions planted in the Netherlands is estimated to be 15 per cent up on last year, the hot weather has more than reduced the volume from this extra area, says Chris Wilkinson of Interveg, which supplies onions to supermarkets, packers, processors and the foodservice sector from dedicated and associate growers in Cambridgeshire and Suffolk. “Yields in Holland for the sets were very poor and for seeded crops also significantly lower than normal,” he says. “Several factors, including severe hailstorms and high temperatures have also reduced size and yield in Spain. This has all resulted in prices, which are well up on this time last year and the year before, and they look set to continue.”
If as predicted, the shortage translates into better retail prices over the season, the problems with the weather may turn out to have a silver lining for onion growers, who in recent years have struggled with volatile pricing. “The onion industry has gone through a rollercoaster in terms of returns in recent years,” says Tim Wigram at G’s Marketing and chairman of BOPA. “Three years ago, growers lost money. This year they will make money.”
According to Andy Richardson of the Allium & Brassica Centre, the high prices are likely to hold up to current levels until the supply switch in May, which could come in early to avoid a gap, he says. They will also help to offset the increased production and utility costs caused by the problematic weather.
“[Higher returns to growers] very necessary since they were disastrous in 2004 and not really good enough last year, except for the end of the season when supplies tightened due to a late decision by some multiples to extend the UK season,” says Wilkinson. “Recent results have been inadequate for reinvestment by growers and this must recommence to allow growers to continue to improve quality for the consumer.”
Food inflation rose to 3.2 per cent in July this year - the sharpest rise since December 2003 - and Tole says it is necessary for the industry to see inflation in UK retail prices for onions, simply to secure enough quality produce for the country’s consumers.
In an average year, the UK is a net importer of onions, and while this year internal demand will probably use up a lot of UK product, unusually, the UK is exporting some of its crops to ease supply pressure in hard-hit areas of Europe.
However, despite the allure of potentially high prices from such places, not all growers will be quick to export product earmarked for the UK because of a loyalty to their supermarket customers, according to Wigram. “People recognise it’s a long-term business and you’ve got to have a sensible approach to it,” he says. “We are dedicated to supplying our customers, and we will negotiate with them for a sensible price because it is these customers who have supported us in the past.”
Richardson is less positive about the increment in prices, and says he is concerned that any good fortune now could contribute to some poor returns in the longer term, as has historically been the case. “European acreage is on a knife edge,” he says. “Good prices this season - as after other hot, dry years in 1976, 1997 and 2003 - mean that acreages will increase significantly in 2007. As a result, with a return to average yields, prices are likely to be rock bottom for the 2007/8 season, as was the case in 1977, 1998, and 2004.”
And, while the whole sector is experiencing a rocky period, processors, it is wagered, are suffering most, being forced into taking increasingly small-sized crops - around 55mm - which in turn is pushing up costs with crops taking longer to peel: not good news for a sector already battling with increasing competition. “The last two years have seen very large volumes of ready-peeled onions arrive from Poland at incredibly low prices and contributed to the demise of one of the UK’s largest processors of onions and put pressure to the point of loss-making on many of the rest,” Wilkinson says. “This contributed to the poor performance of the onion crop from a grower perspective and may signal a long-term issue for that sector of the market,” he says.
Whether it be growing for the fresh or processing sector, the UK onion industry has experienced a decline in production area in the last two seasons due to poorer prices. Planted area was around 8,200 hectares this year - eight per cent lower than 2005 and 20 per cent lower than 2004, according to Wilkinson.
While in the longer term production is actually increasing in line with increased domestic consumption, some growers are turning to other crops with more lucrative prospects, such as wheat and oilseed rape. Wigram says companies such as Tesco are looking for a lot of hectares of oil seed rape for biofuels - an area experiencing a lot of interest. But he suggests the decreasing production area may in many cases simply be reality hitting home. “Onions are traditionally viewed as an easy crop to grow, but in reality, they are very difficult, especially with the technology needed,” he says. “More and more people are realising that unless they align themselves with the market before planting crops, they are not guaranteed real returns.”
Many onion growers are also looking to diversify into more specialist and niche products to secure better prices, and, despite the fact that UK is a net importer of onions, this could open more permanent export doors for export, according to Tole, with specialist onions going to specialist markets.
Market growth for red onions has continued to grow by nearly 20 per cent year on year over the past five years. They now account for around 20 per cent of production. Sweet onion production in the UK is increasing, as is that of organic onions, and consumer trends suggest that other niche products such as shallots, eschallions, and borretane onions are also becoming a more lucrative part of the onion grower’s repertoire and could offer further growth if accompanied by some more radical marketing efforts.
This is something G’s has seen first hand. “We’ve seen great success with Supersweet onions in Tesco,” says Wigram. “Those sales have doubled again this year and we are encouraging growers where appropriate to grow more,” he says.
Similarly, many producers are looking at new varieties, technology and techniques that will allow them to improve quality, yields, ward off diseases and generally help lift the quality of the UK crop.
“New varieties are constantly being trialled with some promising newcomers arriving,” says Wilkinson. “However, despite a lot of effort, the next revolution has yet to be commercialised. Detailed work in harvesting machinery is ongoing as is electronic-defect sorting, which will be a major step forward in guaranteeing internal quality for customers in all sectors,” he says.
Richardson says that to reduce residues, some growers are replacing MH treatment with the Restrain system - an ethylene treatment in-store, first developed for potatoes. “Trials of the first two onions with downy mildew resistance have also taken place this season”, he says.
If retail prices do increase, it seems the weather may provide a much-needed boost for investment in the sector. And despite the unstable pricing seen in recent years and the receding planted area, the industry is enjoying sustained growth, with popularity high thanks to increased multiculturalism, according to Wilkinson. “The industry is in good shape with increasing overall sales of onions as more meals of Asian, Chinese and, to a lesser extent Italian bases, are consumed in all sectors of the UK food industry,” he says. “A return to more realistic pricing will allow reinvestment in all sectors so that the UK industry continues to be at the forefront of quality in the world.”
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