Special Market Update

Dear Valued Customer,

Olam Spices appreciates the opportunity to supply you with the highest quality dried onion and garlic products globally. As your trusted supplier, we would like to give you an update on recent developments in the global onion marketplace and the potential impact on business in the coming months.

As mentioned in our November 2019 Market Update:
“Indian dried onion markets have seen a sharp increase in market pricing both in origin as well as in destination markets over the last 2 months. This is the collective result of the depletion of the excess inventory from the 2017 and 2018 bumper crops and a 30-40% reduction in the CY19 crop production to correct market supply. Informal reports by Indian exporters put origin inventories at between 7-10k MT as at end Oct 2019. With EU spot inventories estimated at only 1-1.5 months and a delayed planting of the 2020 spring onion crop due to unseasonal rains, it was natural for prices to ramp up sharply.”

India is a major participant in global dried onion trade and supply blips in this origin can have a major impact on dried onion availability and prices worldwide. Over the last 4 weeks, the Indian onion supply situation has reportedly worsened considerably, as is evidenced by the following:

• Local fresh onion prices in India have tripled from October 2019 price levels owing to the ~30% production shortfall in 2019 Kharif (summer) crop coupled with a 20-30% expected reduction in the 2020 Rabi (spring) crop. Planting for the spring crop is already delayed and this has increased the probability of an even shorter crop
• Indian dried onion prices have therefore risen sharply. Availability and offers have dropped off significantly and there is speculation that the Indian onion shortage will extend throughout 2020 and that prices will breach the $3000 PMT ($1.36/lb) CFR EU/US threshold by early Q1 2020
• The Indian Govt. has banned exports of fresh onion until Feb 2020 and has also initiated import of 100k MT from Egypt and plans to continue to import fresh onion from other countries
  The combination of the export ban as well as large scale imports of fresh onion is destabilizing global fresh onion supply chains and causing significant volatility in both fresh and dried onion markets
• Egyptian fresh onion prices from the 2019-20 winter crop (which were already under pressure due to a 20% short crop), have moved up 3X times due to the large import surge from India and limited availability. Dried onion prices have consequently moved up and exporters have temporarily withdrawn from the market
• Chinese onion prices are also expected to move up as export demand for fresh onion from South Asia picks up, which will correspondingly impact dried onion prices

In the backdrop of these recent developments, Olam Spices’ US dried onion operation represents a stable, dependable and high-quality source of fully traceable, Non-GMO, gluten-free dried onion, which can provide an important hedge against volatile market conditions. Current availability of Olam’s US onion is adequate and prices are relatively stable.

Organizations who want to de-risk their supply chain from potential volatility from these origins should evaluate converting part or all of their requirement to US onion. Similarly, users of US onion should look to actively cover 2020 requirements as early as possible to avoid a potential tightening of supply as demand strengthens.

We encourage interested parties to contact your respective Olam Spices sales manager to organize a more detailed discussion. As a valued supplier, we will continue to communicate additional and relative developments as they occur — assuring you of our best attention at all times.