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Sizzling onion market heads to lofty heights

by Tim Linden | February 25, 2010
Visions of the record-breaking 2007 spring onion deal are dancing in the heads of growers and shippers as they are watching this season unfold.

With supplies short, the prices on all onions have skyrocketed over the last couple of weeks -- and there is no break in sight.

"I think we could have a very good market for the next four to six months," said Derrell Kelso Jr., chief executive officer of Onions Etc. Inc. in Stockton, CA.

"The crystal ball is cloudy and cracked, and it is always difficult to forecast, but we could have a good market for a long time," said Dan Borer, director of Keystone Fruit Marketing's Walla Walla, WA, office "It very much could be like 2007."

In 2007, the storage onion crops from the Northwest ended early and poor weather caused a decrease in supplies in sweet onion crops from Mexico and Texas. When Texas began shipping in mid-March that year, the market was already over $30 for a 40-pound carton of sweet onions, and white onions topped $50 for a 50-pound bag on occasion. The market remained very hot for almost two months, with sweet onions above $30 during the stretch, at times flirting with $50.

Mike Martin, president of Rio Queen Citrus Inc. in Mission, TX, told The Produce News Feb. 23, "I sold some Mexican [white] onions today for more than $50 a bag. There aren't too many out there, but that is what they are going for. And 40-pound cartons of jumbo sweets are getting $24 today."

A day later, Mr. Kelso of Onions Etc. said that a 50-pound bag of jumbo yellow onions from storage in the Northwest was selling for $14 to $16 per bag, which is about double what they were commanding just a couple of months ago.

Mr. Borer said that the hot market is truly a case of demand exceeds supply, adding that it is also a case of this year's onions far exceeding expectations. "Considering the size of the crop and the state of the economy [back in the fall] when we started putting our onions into storage, we never would have anticipated this kind of market," Mr. Borer said. "But now as we are winding down, the packouts are down and we are just not pulling the volumes that we expect."

Mr. Martin listed several reasons for the current hot market, including the winding down of the storage crop, good export demand, a strong European market and cool rainy weather in Texas and Mexico.

But probably the biggest reason for the short supply situation is what's happening in Mexico, according to Don Ed Holmes, owner of The Onion House in Weslaco, TX.

Onions are an everyday staple in the Mexican diet, and this year there is a shortage of domestic onions, according to Mr. Holmes, who said that the Mexican states of Morelos and Guanajuato traditionally supply the domestic Mexican market with its onions in late winter and early spring. "Rainy weather all but wiped out the onions in those areas this year," he said. "Growers just didn't make their crops this season."

Consequently, he said that much of the production from Tampico that is typically exported to the United States is staying in Mexico right now. "I'll bet you that so far we have only received about 20 percent [from Mexico] of what we got last year," Mr. Holmes said.

The Onion House executive also opined that there is no letup in sight. He said that Mexican growers are going to have a difficult time filling local demand for at least the next four to six months. So not only will there be fewer Mexican onions on the U.S. market, but Mexican buyers are up here taking some of the U.S. production back south.

"The Mexican buyers have been up here for the last couple of weeks with cash taking some of our supplies," agreed Mr. Kelso.

He added that the shortage of onions is also the situation over much of the rest of the world.

"There is a global shortage of onions," Mr. Kelso said. "In 2007 when the market was hot, I brought a lot of onions in from New Zealand and Chile, but that's not going to happen this year. Japan is in short supply. The European onion market has been hot for six months. There are no cheap onions out there."

With the Northwest winding down and Mexico having difficulty filling its own pipeline, Texas grower-shippers will have the deal pretty much to themselves once they get going in mid- to late March, which is expected to be about 10 days later than usual because of the cold weather.

Mr. Kelso said that it would be late April before onions from Vidalia, GA, and the Imperial Valley in California start to hit the market. But he still thinks that supplies will be short. "It looks like weather has taken its toll on Southern onions and the Imperial Valley onion acreage has been shrinking every year. "

He said that the market could easily remain hot beyond June, which is when California's San Joaquin Valley and New Mexico start shipping.

"We could have a shortage for a long time," Mr. Kelso said.