Onions: To grow or not to grow?

By: Jacob Munden

Jacob MundenLooking at the current prices of onions as of 1-21-13, most would think that the obvious answer is yes, grow onions! In fact, I have thought about it myself. There have been a number of times when the opportunity has presented itself, but I have always declined. With production cost between $3.50 and $4.00 a 50lb. sack and the current market ranging from $20.00-$25.00 a 50 lb. sack, it seems to be a no-brainer, right? Well, maybe it is not so obvious. Of course, with this year’s crop, the current market, and good storage, growers should be writing big checks and paying off the farm as we speak. However, we need to remember the basic principles of agriculture economics, supply and demand, and look at the trends of the onion market over the last 4-5 years.

If we remember back to 2006, prices were very similar to what they are today. Growers had a great crop and storages held up creating above average pay days for the farms. Following, however were 2-3 years of below average prices for dry bulbs. Growers lost money and some acreage was pulled out of onions due to the severity of the market. In 2010, prices were above average at around $15/50lb sack, reflecting the loss of acreage from 2008 and 2009. However, again in 2011 and 2012, onion prices were very low with most of the sales season in the $4-$5/50lb sack range.

We all know onions are a volatile crop to grow. The input costs are extremely expensive, the regulations for growing onions are stiffer than ever, and we can never get consistent cooperation from Mother Nature. The markets are driven by supply and demand and can be influenced instantly by a handful of players over supplying the pipeline. Over the last several years, onion operations have consolidated, creating fewer players in the market, which in turn, have more influence on how the market reacts when their product is introduced to the pipeline. Regional weather events, increased fuel cost, lack of labor, and higher demands from retail buyers present many more challenges to today’s onion growers.

If the trend lines maintain their current course, I predict that due to the good market in 2012, acres in the PNW will creep up and provide a slightly larger amount of onions for the market in 2013, which will affect the total amount of sellable product forcing prices down. This will keep the average trends of pricing on course with a spike in price every 3-4 years, following with 2-3 years of below average returns.

So, we come back to the basic question, to grow or not to grow? Regardless of all the variables, growing onions, although not always predictable, has shown some consistent trends over the last decade. For the most part, growers in the PNW are like all other growers and love the challenge of a good gamble and the reward that comes if they wager correctly. A smart grower will plan for a good year every 4- 5 years and prepare accordingly for the poor years. It is all part of a financially stable operation. Those that expect too much suffer and weed themselves out over the course of time. However, if you plan and execute, growing onions can be very rewarding.

So, would I ever think about putting in some onions, looking at a $25 market……not a chance!