Strong onion market continues prolonged run

by Tim Linden | June 03, 2010

For more than six months, the onion market has been very solid — reaching record heights along the way — and the good run is expected to continue for at least several more months.

"It's been a good market since December," said Don Ed Holmes of The Onion House, based in Weslaco, TX. “And I think it will last until at least mid- August when the folks in Idaho, Oregon and Washington start shipping.”

Mr. Holmes was not saying that the market would drop at that point, just that new players and new supplies would enter the picture at that time, which could affect the supply-and-demand curve from that point on.

And make no mistake about it, said the Texas onion expert, the hot run is simply a matter of supply and demand. “The country eats about 400 loads of onions a day, and we haven’t been producing that much all year,” he said. Currently, the onion market was in a range from the high teens to the mid- $20s, depending upon size, type and packing configuration, he said.

South Texas and the Imperial Valley in California are nearing the ends of their deals, with Central California and New Mexico just getting underway. On June 1, the U.S. Federal State Market News Service reported a market price of $34-$36 for red onions coming from California’s San Joaquin Valley. Jumbo yellow onions in 25-pound sacks were close to the Texas prices, selling for $21-$22.

Mike Figone, vice president of West Coast Vegetable Co. Inc. in Lodi, CA, agreed with Mr. Holmes’ assessment. Surveying the country’s onion landscape quickly, he said that both south Texas and Georgia are nearing the end of their deals and that New Mexico is having trouble making a good crop. “I think [the San Joaquin Valley in] California is in the driver’s seat,” said Mr. Figone. “We have an average crop — it’s not going to be a barn-burner. We have good weather, in the 90s, nothing that’s going to cause any 911 calls. There are major crop problems in New Mexico. Everything is small in their pre-packs. You know what that’s going to do to yields later on,” he said, not needing an answer. “This thing is made for a while.”

Mr. Figone agreed that it takes about 400 daily loads to fill the nation’s demand, and he does not see production topping that figure through most of the summer. However, he has heard that growers in the Pacific Northwest increased their acreage this year, so “come late August or early September, we could see things changing” in the supply-and-demand equation.

Charlie Johnson of the Charles Johnson Co. in Las Cruces, NM, confirmed that yields are down from that district as much as 20-30 percent because of weather-related issues during the growing season.

“We are going to have no better than an average crop this year,” he said. He believes that the lack of production in areas such as New Mexico should make for a very good summer onion market.

Another operation with onion acreage in New Mexico is J&D Produce Inc., with headquarters in Edinburg, TX. Company President James Bassetti told The Produce News June 2, “We’ve just finished up in south Texas and are starting in New Mexico. And I can tell you the New Mexican onions are very small.” Small onions, of course, will reduce yields as it takes more of them to fill up a sack to the appropriate weight.

Mr. Bassetti agreed that New Mexico’s onion production from that region could be down about 25 percent this season.

“It has been a weather phenomenon this year,” he said. “We had an unseasonably cool and wet year [in south Texas] with a lot of untimely rains. That has hurt our yields. Vidalia also had a very, very cold year, and the cold weather is hurting New Mexico.”

Like the others interviewed, Mr. Bassetti does not expect the onion market to see any big dip in prices until September. “The market held its own when California came in, and I think it will be the same all summer,” he added. Mr. Holmes said that this season has been the best market for Texas onion shippers in almost a decade. “The last time we had a good market for the entire season was 2002,” he said.

While the f.o.b. price in 2007 also climbed into the stratosphere, topping $50 at one point for whites and sweet onions, that season also had its low points. This season, the market again topped $50 at times, and it has never sunk even close to a below-cost range.

Mr. Holmes said that each time a new district enters the deal, the price takes a little bit of a drop, as there is a temporary increase in the number of sellers even if there is no overall increase in the number of onions available. But as the new deals take hold, he said, it became apparent that the onion supply still is not there to adequately fill demand, and the price goes right back up.

“That’s what’s been happening all year,” he said, with a hint of elation in his voice.

But Mr. Holmes was also quick to point out that all good things do eventually come to an end.

“The bad news is that every doctor or lawyer with some land [in south Texas] is going to plant onions next year. With cotton and grain prices being where they are, we are going to have wall-to-wall onions next year,” he predicted.