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AgWest Farm Credit’s 12-month outlook for onions suggests slightly profitable returns.
Despite Hurricane Hilary delaying Idaho’s onion harvest and raising shrink concerns, overall quality remains good. Warm weather benefited other regions, boosting supply and yields. Strong restaurant demand and Mexican import needs are driving onion prices higher, offering profitability to growers even as production costs remain elevated. Careful shrink management and maintaining strong prices will be key for growers in 2024.
12-Month Profitability Outlook
Onion quality unphased by weather delays
Idaho and Malheur County, Oregon, onion harvest was interrupted by Hurricane Hilary which caused major delays to the start of onion harvest. The Treasure Valley received between 1.5 to 3.5 inches of rain, more than 30% of the region's annual rainfall. Some areas received as much as 50% of their annual rainfall in less than a week. By September 17, 2023, Idaho was behind schedule with only 15% of onions harvested, less than half the normal amount. Yields improved and onion quality was better than expected, but there are concerns about shrink issues because of the untimely rains. Storage sheds will need to carefully manage their inventory.
In Washington’s Columbia Basin and Oregon’s Umatilla Basin, the onion crop was in excellent condition as warm summer days in July created ideal conditions for onion growth, helping to ensure more large onions. Storage sheds report having more onions available.
Consumer demand for onions on the rise
Restaurant demand tends to serve as a proxy for onion demand. Despite looming economic uncertainties, restaurant sales have experienced nine consecutive months of growth and are well above the prior year’s levels. If restaurant demand strengthens, onion sales may also see some increases.
Retail Sales: Restaurant and Other Eating Places
Onion prices spiking amidst increased export demand
Onion prices have been on a rollercoaster fueled by strong Mexican demand and a smaller Canadian crop. In Mexico, water shortages impacted their domestic onion supply. Mexican demand for Northwest onions was stronger than normal starting in November, and Mexico will likely see fewer onion acres ready for harvest in the spring. Since early November, jumbo yellow prices have doubled. On November 1, 2024, jumbo yellows were mostly $8 per 50-lb. sack, within two months those prices have increased to $17 per 50-lb. sack on January 19, 2024. Canada’s onion crop was very short due to heavy rainfall during harvest, resulting in unharvested acres. This could lead Canada to purchase onions from the Northwest earlier than usual, supporting stronger prices.
Onion production costs have risen to double their pre-pandemic levels due to inflation, supply chain challenges and fuel costs. While production expenses are expected to decrease by 2% in 2024 due to lower fertilizer, fuel and chemical prices, this is not enough to offset the significant rise in production costs over the past three years. Growers will need strong onion prices to remain profitable in 2024, but commodity prices often decrease faster than production costs. Onion prices have started the year strong due to increased Mexican demand, which is good news. With increased shrink issues expected as the Northwest remains the primary onion shipping region, shipping prices should continue to see strong prices through the summer of 2024, especially for jumbo or larger-sized onions. For producers, managing production costs and ensuring strong onion prices will be vital to maintain profitability.
For more information or to share your thoughts and opinions, contact the Business Management Center at 866.552.9193 or bmc@AgWestFC.com.
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