The planting for the CY23 crop is ~90% complete across California with some acreage still to be planted in the West side of Fresno County, Central California, as well as Tule Lake in Northern CA. However, planting in the states of Oregon and Washington is still to commence and will be completed by the end of Q1, 2023. Overall planted acreage for the CY23 season is expected to be similar to last year despite continued drought pressures, labor availability, and input cost inflation.
An “atmospheric river” dumped a great deal of moisture across California between December 2022 and January 2023 which resulted in areas of the state being flooded. While the rains were welcome after 3 continuous years of drought – the extent and intensity of the storms have been beyond the capacity of current infrastructure in some areas and have therefore left some regions and businesses temporarily impacted as a result.
On a positive note, California precipitation and snowpack levels have improved compared to last year. The rains have been timely for planted onion and garlic regions in Southern and Central CA. Rain intensity has Improved topsoil quality by reducing soil salinity which could help improve yields going forward. The larger snowpack increases the chances of higher water allocations for agricultural contractors for the CY24 season.
On the negative side, excessive rains have caused some fields to have standing water. This can bring about an increase in foliar disease, higher weed pressure, and soil compaction in the CY23 season. Onion and garlic fields have largely escaped this problem so far, but additional heavy weather is expected in the coming weeks.
The consistent precipitation has shortened the onion planting window in Kern County, San Joaquin Valley, and the West side of Fresno County. This has forced some growers to withdraw completely as fields could not be prepped in time. Key highways in CA leading to ports and arterial junctions have seen closures due to flooding; however, the impact is temporary and has not caused significant delays.
Meanwhile, in preparation for the CY23 season, growers and processors across California and the Pacific Northwest are adapting to the continued challenges in respect of elevated farming input costs (fertilizers/pesticides), rising labor costs, and eroding crop returns per acre for onion and garlic relative to other row crops. Despite the tough environment, onion processors have been able to secure adequate acreage to service core domestic and export demand for the next crop cycle.
A reduction in tree crop acreage has increased interest and land availability for row crops in California including onion. Furthermore, inflationary conditions experienced in utilities and diesel have abated for the moment and could remain stable for the summer of CY23. Disruptions to export shipments have declined and export backlogs have reduced sharply along with ocean freight rates.
Labor costs, however, continue to rise. Y/Y ECI (Employment cost index) estimates are up 5.1% as of the end of Q4 2022. Fertilizer and input costs continue to remain elevated. Overall PPI (Producer Price index) Y/Y increases for processed goods (food) for intermediate demand stood at 11.3% at the end of Dec 2022. These trends combined with the impact of continued increases in competitive crop prices are expected to keep some upward inflationary pressure on onion prices for the CY23-24 contract cycle though the impact is not expected to be as severe as the previous 2 years.
Yellow Onion: Egypt’s CY22-23 winter onion crop planting is down sharply over last year due to weak pricing during 2022 and poor fresh onion exports. CY23 onion prices are up sharply driven by lower output and increased demand for fresh onion from the Middle east and Europe. The winter grower prices have more than doubled compared to the past 5-year average and are expected to increase further as fresh export demand is likely to increase from early 2023. The shortage of onion has resulted in most operators running at lower capacities for winter.
Meanwhile, Egypt has seen a significant increase in agri-input costs, which have almost doubled. Packaging costs are up 25% and inland transportation costs are up by ~15%. Labor costs are also seeing sharp inflationary increases. The overall inflationary impact has been offset to a large extent by the devaluation of the Egyptian Pound vs USD. The higher prices for the winter crop are expected to boost the planting of summer onion, hence expecting the summer prices to cool off starting from April 2023. However, the warmer weather is expected to negatively impact the micro profile of the summer onion.
White Onion: The CY23 white onion crop is planted at a similar level as CY22. The crop is progressing well with no weather or disease-related risk foreseen at this time. Harvest will start towards April 2023. The CY23 crop has been planted in an inflationary cost environment with higher labor, fuel, and input costs together with hikes in ocean freight rates. The impact of these increases, however, has been offset to a certain extent by the devaluation of the EGP vs USD.
Other Markets (India, China, Europe)
India: Based on early indications the CY23 crop could be a slightly reduced crop compared to CY22 for dehydration. This is mainly driven by less acreage. Some CY22 inventory is still available at discount compared to new crops. CY23 crop
costs are likely to be much higher, driven by higher raw onion prices and input energy costs. This could cause upward price corrections over the next few weeks
China: Origin onion flake prices today are higher than at the same time last year. This is mainly caused by a reduction in CY22 planted acreage over CY21. The CY23 harvest is likely to begin by the end of August and market availability will remain constrained till the new crop.
Europe: Onion crops are estimated to be less than last year, mainly due to weather-related impacts. Increased utility, labor, and transport costs along with a shortage of raw materials are pushing up the dehydrated prices.
- US Onion: Pricing for the CY22-23 contract cycle has moved up relative to the previous cycle. Pricing is expected to remain stable at these levels through Mid-2023 till the CY23 crop outlook is reasonably clear.
- CY23-24 contract pricing will be driven by this crop outlook as well as prevailing trends in cost inputs, labor, utilities and customer demand. A clearer picture of this will only start emerging by end of Q3, 2023.
- Standard shipping lead times continue to reduce and currently stand at ~10 business days against stated 15 days.
- ofi’s Ag network, grower relationships, and knowledge of the region has enabled the business to remain ahead of the water situation and secure acreage in new regions at short notice despite a delayed and shortened planting window.
- Organic US onion availability is also set to increase sharply in tandem with consumer demand.
- A revised ADOGA manual with updated specifications/test methods for US Onion and garlic has been issued by CLFP (California League of Food Processors)
- India: Progressively elevated pricing likely through mid- 2023 as CY22 availability winds down and CY23 crop costs start playing into market sentiment.
- China: Elevated pricing likely in coming months in sync with other origins, driven by lower inventories from the last crop.
- Egypt: Elevated pricing likely to continue through the rest of the season for both Yellow and White onion
Planting for the CY23 crop is complete and industry acreage is estimated to be similar to levels planted in the previous season. The crop planting and progress have not been adversely impacted by the recent California storms and flooding. The crop has seen good chilling hours this season which augurs well for improved yields.
Overall inventories across most fractions are adequate to take care of regular domestic demand albeit at higher prices. Similar to US onion, US garlic is also impacted by grower, labor, and input cost inflation. The CY22-23 market pricing reflects these trends.
Garlic planted acreage for CY23 is estimated to be lower than the last year. This is driven by slow demand for fresh garlic, weak garlic market prices, and higher support prices for wheat, as well as high inventories/carry forward from the last crop for both fresh garlic and dehydrated flakes. Garlic flake prices saw an uptick in the run-up to Chinese New Year driven by the increased realization of the reduced acreage as well as weakness in the USD.
Most of the carry forward flake is in the hands of exporters, processors, or speculators who could hold inventories for long periods and have been aggressively driving up prices. Furthermore, fresh garlic export demand from China is seeing a strong resurgence in the Asia pacific causing fresh prices to move up. Weather trends for garlic growth are normal to date and yield expectations are expected to be normal based on currently available information.
- Prices moved up in the CY22-23 contract cycle.
- Prices are likely to remain stable at prevailing levels through the next season.
- Minced garlic and extra low micro availability across all fractions is likely to remain tight in the near to medium term.
- Toasting and irradiation capacities are operating at a high utilization and increased demand could drive up lead times and costs
- The weather and crop emergence in Chinese garlic growing regions through the rest of the season needs to be watched carefully as it will have a critical influence on the crop yields and this could have a major impact on grower
costs and corresponding garlic prices in the CY23 crop.
- Origin markets are closed for Chinese New Year for the moment. Flake pricing could see sharp volatility as the market reopens, especially once crop emergence confirms/negates the extent of the crop shortage.
US Onion and Garlic Video Update
View our latest US onion & garlic crop and weather update to hear from our expert crop supervisors and VP of Agriculture Operations North America, Daniel Conway.
CY23 area is down compared to last year. The crop is currently at the fruit ripening to harvesting stage. Black thrips infestation has been observed across the growing regions. Farmers are spraying pesticides to protect their crops. IPM crop availability will be a challenge this year.
CY23 area is marginally higher compared to CY22. The crop is at rhizome maturation stage. The crops have been observed to be standard with minimal pest and disease incidences. Yields are expected to be better than last year
Cumin & Coriander
Cumin:CY23 area is marginally higher versus last year. The crop is at vegetative growth to flowering stage. Early sown crop faced germination issues and poor vegetative growth due to warm temperatures. Pest and disease incidences were observed across growing regions which could lead to lower yields. Cumin crops
are expected to be less than normal and carry out stock is also expected to decrease when compared to the last few years
Coriander:CY23 area is expected to be significantly higher than last year. The crop is at the flowering stage and the weather is favorable. Yields are expected to meet demand.
- Chilli: IPM Chilli prices are expected to remain stable
- Turmeric: Prices are expected to remain stable
- Cumin: Prices are expected to remain firm
- Coriander: Prices are expected to remain stable
US - Paprika/Red Chiles
The harvest and dehydration season is over. Characteristics such as color and pungency performed as expected. The new crop season is in the planning stage with farmers. There are pricing pressures from increasing input costs over last year. The industry is working closely with farmers to manage cost scenarios to avoid price increases.
China - Paprika
The paprika planting area and quantity is larger than in previous years, but the Covid-19 situation continues to impact overall market availability.
US - Green Chiles / Jalapenos
The winter area of SW Mexico has begun harvest albeit, slowly. Yields are expected to be normal, just delayed. Cooler than normal temperatures on the West Coast of Mexico have slowed down maturation of all crops. The current civil unrest in Mexico has had an impact on transportation. The transportation of products is slowed down by roadblocks by federal police and other factions.
Mexico – Specialties
The harvesting and processing continue in Mexico for chipotle, guajillo, ancho, and other specialty chiles.
The harvest in Vietnam is expected to start post the Lunar new year holidays. The Cambodia harvest activities are expected to start in March. Estimated 2023 production both in Vietnam and Cambodia are expected to be the same or slightly better than in 2022. China continued to import pepper from Vietnam in decent quantities in the 2nd half of 2022. Overall, Vietnam reported a decline in exports in 2022 vs 2021. In Brazil, trading activities have been slow since the year-end holidays and are expected to pick up again in March.
Nutmeg & Cassia
Nutmeg: The new harvest will start in February, but quality remains a concern.
Cassia: Harvesting activity in Vietnam has completely stopped since December as the current weather is not suitable for the peeling of bark from the trees. The harvest will restart in March and will continue till June. This will produce low-oil-content cassia bark. Indonesian cassia harvest was slow due to slower demand.
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