Why are onion prices rising abruptly?

The prices of onions rose abruptly in Bangladesh today, marking a hike of Tk 10 to Tk 15 per kilogramme (kg) at kitchen markets in Dhaka and deepening the woes of consumers.

The sudden price hike of the staple cooking ingredient came against the backdrop of annual inflation in Bangladesh surging to its highest level in 12 years in the just-concluded fiscal year.

Annual inflation rose to 9.73 percent in fiscal year 2023-24, the highest since 2011-12, when it was 10.62 percent, according to the Bangladesh Bureau of Statistics.

Traders and government officials said that a supply crunch, lower imports, and lower yields were the main causes of the present volatility in prices of onions.

Nurul Alam Shikdar, a retailer at the Pallabi Extension area of the capital's Mirpur, said onion prices had been rising gradually for one and a half months.

He added that they were selling local varieties of onions for Tk 125 per kg today, which reflected a rise of Tk 10 to Tk 15 in the span of 24 hours.

According to the state-run Trading Corporation of Bangladesh (TCB), local varieties of onions were being sold for Tk 105 to Tk 115 per kg today compared to Tk 95 to Tk 100 per kg a week ago.

The price increased 41.94 percent since last month, when local onions were being sold for Tk 75 to Tk 80 per kg, and by 46.67 percent since last year, it showed.

Meanwhile, the price of imported onions has also increased.

Data from the TCB showed that each kg of imported onions was being sold for Tk 100 to Tk 110 today compared to Tk 95 to Tk 100 a week ago.

The price increased by 20 percent in a month and 133.33 percent in a year, it added.

The agriculture ministry claims that 34 lakh tonnes of onion were produced in the country this year. Although that figure is enough to meet national demand, the ministry added that another 6-7 lakh tonnes would need to be imported as much of the yield is wasted due to a lack of storage facilities.

However, traders in Dhaka's Shyambazar area, a major onion-selling hub, claimed that local output was 15 to 20 percent below the agriculture ministry's estimates due to crop damage from adverse weather last February.

Mohammad Abdul Mazed, a wholesaler and general secretary of the Shyambazar Onion Wholesalers Association, said there was a shortage of local onions in the market.

Besides, onion prices are increasing due to low imports from India, Pakistan, Turkey and other countries.

The onion planting season in Bangladesh begins in October and the crops are harvested in late-April to mid-June.

However, many farmers started selling onions before the start of the harvesting season due to the high prices on offer.

This trend of premature harvesting, combined with the effects of inclement weather, has seen production drop by around 15 to 20 percent compared to the agriculture ministry's estimate, Mazed observed.

As the prices are high, some of the traders in the supply chain are holding onto onions anticipating further hikes. Due to this, the supply has been squeezed and the price has increased abruptly, he added.

Dipankar Ghosh, organising secretary of the Clearing and Forwarding Agents Association at the Bhomra land port in Satkhira, said onion imports from India were halted for four to five months recently due to high prices after Bangladesh's neighbour had lifted an export ban on the kitchen essential in May.

After lifting the export ban, which it originally imposed in December last year, India imposed 40 percent duty on exports of the vegetable.

Onion prices also increased in India due to lower production, said Gosh. As a result, the price of imported onions is very high in Bangladesh, which is unusual.

As a result, demand for local onions increased.

Shahadat Hossain, senior agricultural marketing officer of the Department of Agricultural Marketing in Faridpur, one of the major onion-growing hubs, said many onions are rotting due to frequent rains at present. So, the price of onions is increasing.

In February, newly harvested onions were sold for Tk 80-100 in Dhaka. In March, the price exceeded Tk 120 before decreasing slightly and increasing again in April. Ahead of Eid-ul-Azha last month, the price of onions hit Tk 120-125 before easing again.