SUDDEN ONION PRICE SURGE IN BANGLADESH:
A SITUATION ANALYSIS FOR POLICY
Akhter U. Ahmed and Kaikaus Ahmad 1
Bangladesh Policy Research and Strategy Support Program (PRSSP) 2
International Food Policy Research Institute (IFPRI)
September 17, 2013
Summary
From early July to August 18, 2013, the market prices
of onion rose dramatically in Bangladesh. Although
prices showed a downward trend at the end of
August and early September, they have begun to rise
again. What caused this sudden onion price surge?
The International Food Policy Research Institute’s
evaluation identified a variety of linked factors.
Onion is popular in Bangladeshi cooking, so demand
for it is high—and growing steadily alongside Photo: Wikimedia Commons
increasing incomes and population. In fact, demand is
expected to increase by 51 percent this decade—from 1.23 million metric tons in 2010 to 1.86
million metric tons in 2020—under the business-as-usual scenario. Under an optimistic income
growth scenario, it’s expected to increase by 69 percent to 2.08 million metric tons.
Onion cultivation is quite profitable in Bangladesh. In 2012, on a cash-cost basis, onion had a
profitability rate of 91 percent of the average cost per ton of onion produced.3 That rate
decreases but still remained profitable at 37 percent of the production cost per ton when the
estimated values of land rent and family labor are taken into consideration in cost calculations.
The crop is a highly commercial commodity, and onion farmers sold an estimated 86 percent of
their gross onion production, according to data from the 2011–2012 IFPRI-PRSSP Bangladesh
Integrated Household Survey.
Despite the domestic onion’s profitability and production growth at an annual rate of 7.3
percent between 2004/05 and 2011/12, imports from India dominate the market in
Akhter Ahmed (a.ahmed@cgiar.org) is the corresponding author for comments and queries. The views and opinions
contained in this report are those of the authors and do not necessarily represent IFPRI or USAID.
The authors gratefully acknowledge the analytical support and information provided by Samira Choudhury, Samita
Kaiser, Shafiqul Karim, Aminul Islam Khandaker, Wahid Quabili, Fiona Shaba, and Rahmana Shamsad of the IFPRIPRSSP team; and Zahidul Hassan and his team at the Data Analysis and Technical Assistance (DATA).
2
PRSSP is funded by the U.S. Agency for International Development (USAID) and implemented by IFPRI.
3
This calculation is based on data from the 2011–2012 IFPRI-PRSSP Bangladesh Integrated Household Survey and an
average cost-per-ton for onion in 2012. As a “cash cost” calculation, the imputed values of land rent and family labor
are not taken into account.
1
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Bangladesh. In 2011–2012 imported onions constituted about one-fourth of the estimated 1.3
million metric tons of “total onion availability” (the sum of net domestic production and
imports), they accounted for nearly 60 percent of the average total onion stocks at wholesale
markets in Dhaka city, the main consumption center of the country, during the price-surge
period of July 22–August 22, 2013. These patterns indicate that the Indian onion plays a key role
in determining the market price of onions in Bangladesh.
India produces around one-quarter of the global onion supply (second only to China), and
exports about 10 percent of its total onion output—much of it to Bangladesh, Malaysia, and
Singapore. In fact, historically, India has been the only source of onion imports to Bangladesh.
Because of this, when recent drought in India’s main onion production zones led to major crop
losses, onion imports in Bangladesh obviously decreased as well.
The market supply of onion in Bangladesh declined not only because of the reduction in imports
from India but also because local traders took advantage of the situation by curbing the release
of their stored onions into the market in order to make extra profit. On August 17, 2013, the
Bangladesh government announced its decision to import onion from Myanmar. Following this
announcement, the market price of onion began to drop, likely because the traders supplied
their previously stored stock of onion into the local market. Despite this, onion prices started
rising again, but, this time, as a consequence of the significant reduction in imports.
Based on the situation analysis detailed in this report, the authors offer the following policy
recommendations for managing onion production and prices in Bangladesh in the short-,
medium-, and long-term.
Short-term policy recommendations:
• Decrease dependency on India and vulnerability to climate-induced losses by importing
onions from alternative sources. Consider China, Egypt, Malaysia, Myanmar, Pakistan,
Turkey, and Vietnam.
• Carefully assess the impacts of onion imports on prices to avoid reducing prices so much so
that they become a disincentive for Bangladeshi farmers to produce onion.
• Be vigilant against speculative storage between September and December, when
Bangladesh is most dependent on onion imports.
• Ensure the supply of high-quality inputs—particularly seeds, fertilizers, and pesticides—to
farmers in a timely manner to increase domestic production of onion and reduce the
country’s overall dependency on imports.
Medium-term policy recommendations:
• Explore ways to establish an enabling environment that promotes more participation in the
onion trade and guards against excessive stockpiling. This would increase competition in
the supply market and erode the scope for seeking windfall profits through speculation.
• Take measures to reconcile the major discrepancies between data reported by the
Bangladesh Bureau of Statistics (BBS) and data reported by the Department of Agricultural
Extension (DAE). Improve the quality of information available on agricultural production
and minimize its delivery time to help policy formulation and decision-making.
Long-term policy recommendations:
• Mitigate dependency on onion imports by taking steps to increase domestic production.
Since Bangladesh has very little fallow arable land available, future production increases
will have to come from higher yields rather than increased cultivation area. Research has a
pivotal role to play in developing new agricultural technologies and innovations to address
onion production problems. Effective extension systems, appropriate policies, and
supportive institutions will allow farmers to make use of those technologies to their benefit.
Page | 2
Background
The onion is a key ingredient in most Bangladeshi meals, so its sudden price spurt in the
domestic market since early July 2013 has raised concerns in the population and the
government. While the price surge hits low-income consumers the hardest, it can also become
an important political issue. For example, in India, onion prices were regarded as the decisive
factor in the 1998 state elections in Delhi and Rajasthan and were responsible for bringing
down the central government in 1980.
Upon request from the U.S. Agency for International Development (USAID) Mission in
Bangladesh, the IFPRI-PRSSP team has undertaken this situation analysis of the onion price
surge with a view to derive policy recommendations for onion price stabilization in the country.
Sources of Information
Based on information collected from the sources listed below, we have analyzed the recent
onion price situation in Bangladesh.
•
•
•
•
•
•
•
Consultations with relevant officials in the Ministry of Agriculture, Ministry of Commerce,
and the Tariff Commission
A rapid surveillance of onion wholesale markets in Dhaka city to collect information from
wholesalers on daily stocks and selling prices of both local onions and those imported from
India during the period from July 22 to August 22
Interviews with onion importers and traders on the suspected causes of the onion price hike
Estimates of production costs and marketed surplus of onion based on data from the IFPRIPRSSP 2011–2012 Bangladesh Integrated Household Survey (BIHS) results
Telephone interviews with selected onion farmers from the 2011–2012 BIHS sample
Analysis of (1) secondary time series data on daily and monthly onion wholesale and retail
prices from the Department of Agricultural Marketing; (2) yearly onion production trends
from the Bangladesh Bureau of Statistics and the Department of Agricultural Extension; and
(3) weekly and monthly onion import data from the Bangladesh Bank (Central Bank)
Reviews of online and print media about the onion price issue in Bangladesh and India
Onion Price Analysis
Two types of onion are available in the domestic market: local (Bangladeshi) and imported
(from India). From early July to August 18, 2013, the market prices of both types rose sharply.
The price of Indian onion jumped from 25 taka per kilogram (Tk/kg) on June 2 to Tk 78/kg on
August 18—a 212 percent price increase in only two and a half months. The average retail price
of local onion registered a 133 percent increase during the same timeframe, starting at Tk 30/kg
on June 2 and reaching Tk 70/kg on August 18 (Figure 1 and Table A1). In the span of one
year—from August 18, 2012, to August 18, 2013—the retail price of Indian onion rose by 290
percent and that of local onion by 133 percent (Figure 2).
Indian onion’s retail price began falling on August 19, local onion’s on August 21. By September
4, the retail prices were Tk 60/kg for Indian onion (down 23 percent from the August peak
price) and Tk 58/kg for local onion (down 17 percent from the August peak price). However,
the prices started rising again from September 8. On September 16, the retail price of Indian
onion reached Tk 80/kg, and the price of local onion reached Tk 70/kg (Figure 1 and Table A1).
Page | 3
Figure 1. Trends in daily retail prices of Bangladeshi and Indian onions in Dhaka city,
August 1–September 16, 2013
90
80
Price (Tk/kg)
70
60
50
40
30
20
10
0
Local retail (minimum)
Indian retail (minimum)
Source: Data from the Department of Agricultural Marketing, Ministry of Agriculture. See Table A1.
Figure 2. Trends in daily retail prices of Bangladeshi and Indian onions in Dhaka city, July
1, 2012–September 16, 2013
90
80
Price (Tk/kg)
70
60
50
40
30
20
10
0
1-Jul-12
1-Sep-12
1-Nov-12
1-Jan-13
Local retail (minimum)
1-Mar-13
1-May-13
1-Jul-13
1-Sep-13
Indian retail (minimum)
Source: Data from the Department of Agricultural Marketing, Ministry of Agriculture. See Table A1.
Although the average wholesale prices of local and Indian onions came down in the last week of
August and early September, the reductions were not fully translated into the retail prices
(Figures 3 and 4). This is probably because the retailers who purchased onions at higher
wholesale prices would not reduce retail prices until they exhaust their stock purchased at
higher prices. But this pattern did not hold for the opposite price trend: when the wholesale
price started rising again in the second week of September, retail prices of local and Indian
prices adjusted promptly to the rising wholesale prices.
Local onion prices have typically been higher than Indian onion prices, but that pattern
reversed during the recent price surge, as seen in Figures 1 and 5.
Page | 4
Figure 3. Trends in daily wholesale and retail prices of Bangladeshi onion in Dhaka city,
July 1, 2012–September 16, 2013
80
70
Price (Tk/kg)
60
50
40
30
20
10
0
1-Jul-12
1-Sep-12
1-Nov-12
1-Jan-13
Local wholesale (minimum)
1-Mar-13
1-May-13
1-Jul-13
1-Sep-13
Local retail (minimum)
Source: Data from the Department of Agricultural Marketing, Ministry of Agriculture. See Table A1.
Figure 4. Trends in daily wholesale and retail prices of Indian onion in Dhaka city, July 1,
2012–September 16, 2013
90
80
70
Price (Tk/kg)
60
50
40
30
20
10
0
1-Jul-12
1-Sep-12
1-Nov-12
1-Jan-13
Indian wholesale (minimum)
1-Mar-13
1-May-13
1-Jul-13
1-Sep-13
Indian retail (minimum)
Source: Data from the Department of Agricultural Marketing, Ministry of Agriculture. See Table A1.
Onions in Bangladesh are produced in two ways: from roots (around 15 percent of total
production) and from seed (around 85 percent of total production). Onions from roots are
harvested in December while those from seed are harvested between early April and early May.
The monthly price trends shown in Figure 5 suggest that onion prices are relatively low during
harvest time, particularly during April of 2011, 2012, and 2013, when prices were indeed at
their lowest.
Page | 5
Figure 5. Trends in monthly average national retail prices of Bangladeshi and Indian
onions, July 2010–August 2013
60
Price (Tk/kg)
50
40
30
20
10
0
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13
Local retail
Indian retail
Source: Data from the Department of Agricultural Marketing, Ministry of Agriculture. See Table A2.
To examine the extent of irregularities in onion prices, we separated the seasonal price effects
resulting from onion harvests from the price trends. 4 Figure 6 shows that the seasonal effects of
onion harvests on prices have largely been removed from the deseasonalized price series.
Figure 6. Trends in monthly prices of Bangladeshi onions, July 2010–August 2013 (actual
versus deseasonalized prices)
60
Price (Tk/kg)
50
40
30
20
10
0
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Actual price
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Deseasonalized price
Source: Calculated by authors using data from the Department of Agricultural Marketing, Ministry of
Agriculture. See Table A2.
First, we computed a seasonal index for the monthly average prices of local onion by using the “ratio to moving
average” method, which involves the estimation of a 12-month centered moving average of the price series. Then, we
“deseasonalized” the price series by dividing every entry in the original price data by the seasonal index.
4
Page | 6
Figure 7 shows the irregular movements of onion prices. 5 The maximum positive deviation from
the mean was 73 percent in August 2013, followed by 46 percent in January 2011, 45 percent in
July 2013, and 38 percent in December 2012. The maximum negative deviation was 54 percent
in January 2012. These variations were mostly caused by irregular or random factors rather
than by changes in domestic onion production. The irregular factors would likely include
fluctuations in onion imports and import prices, hoarding by onion traders, or transportation
problems.
Figure 7. Irregular variations in prices of Bangladeshi onions, July 2010–August 2013
Percentage deviations from the
mean
60
40
20
0
Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13
-20
-40
-60
Source: Calculated by authors using data from the Department of Agricultural Marketing, Ministry of
Agriculture. See Table A2.
Data Analysis and Technical Assistance (DATA), a Bangladeshi survey firm that has conducted
numerous surveys for IFPRI, collected information from onion wholesalers on daily stocks and
selling prices of imported and local onions from July 22 to August 22 and interviewed traders
for their views on what caused the onion price hike. The DATA team collected information from
four wholesale markets in Dhaka city: Kawran Bazar, Mohammadpur Krishi Market, Moulavi
Bazar, and Shyambazar.
The following figures show the daily average stocks and selling prices of Indian onions (Figure
8) and local onions (Figure 9) at Shyambazar, the largest wholesale market for onions in Dhaka
city, from July 22 to August 22, 2013.
5 We transformed the deseasonalized prices into percentages of the overall deseasonalized-price-series average and
presented the results in Figure 7 as percentage deviations from the average.
Page | 7
16,000
70
14,000
60
12,000
50
10,000
40
8,000
30
6,000
20
4,000
10
2,000
0
wholesale price (Tk/kg)
Daily average stock (kg)
Figure 8. Daily average stocks and selling prices of Indian onion at the Shyambazar
wholesale market in Dhaka city, July 22–August 22, 2013
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Date (Jul 22 - Aug 22)
Stock
Price
Source: Rapid surveillance data collected by Data Analysis and Technical Assistance.
Figure 9. Daily average stocks and selling prices of Bangladeshi onion at the Shyambazar
wholesale market in Dhaka city, July 22–August 22, 2013
70
8,000
60
7,000
50
6,000
5,000
40
4,000
30
3,000
20
2,000
10
1,000
0
Wholesale price (Tk/kg)
Daily average stock (kg)
9,000
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Date (Jul 22 - Aug 22)
Stock
Price
Source: Rapid surveillance data collected by Data Analysis and Technical Assistance.
Figure 8 shows that the fitted trend lines for onion selling prices and onion stocks are negatively
associated; that is, as the stocks increase, the selling price decreases and vice versa. This
relationship is much stronger for the imported Indian onions than for the Bangladeshi onions
(Figure 9). These patterns at the wholesale market indicate that the Indian onion plays a key
role in determining the market price of onions.
Figure 10 compares the patterns of daily average stocks of Bangladeshi and Indian onions at the
Shyambazar wholesale market from July 22 to August 22, 2013. Imported onions constitute less
than one-third of total onion availability (that is, the total of domestic production and imports)
in the country. Even though the day-to-day variation in daily stocks of local and Indian onions
Page | 8
have been quite large, imported onions accounted for 60 percent of the average total stocks
(Indian plus local) during the period from July 22 to August 22 in the largest wholesale market
in Dhaka city, the main consumption center of the country. These patterns again show the
dominance of imported Indian onions in the domestic market.
Page | 9
Figure 10. Daily average stocks of Bangladeshi and Indian onions at the Shyambazar wholesale market in Dhaka city, July 22–August 22,
2013
15,000
14,000
Daily average stock (kg)
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Indian
Bangladeshi
Source: Rapid surveillance data collected by Data Analysis and Technical Assistance.
Page | 10
Supply of Onion
The supply of onion in Bangladesh consists of domestic production by farmers and imports
(mainly by private importers but also by the government).
Domestic production and long-term price trends
Figure 11 shows the trends in domestic production and real prices, which are adjusted for
inflation and expressed in constant 1995/96 prices. 6 Onion production in Bangladesh has
increased remarkably—by almost sevenfold—from only 150 thousand tons in 2001/02 to 1.16
million tons in 2011/12. The changes in real prices within the domestic market, however, do not
reflect any noticeable association with the changes in national production levels. Actually, the
pattern of onion prices more likely reflects the production situation in India.
14,000
1,200
12,000
1,000
10,000
800
8,000
600
6,000
400
4,000
200
2,000
Production
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
0
2002/03
0
Real price (Taka/metric ton)
1,400
2001/02
Production (metric tons, thousands)
Figure 11. Trends in domestic onion production and real (inflation-adjusted) wholesale
onion prices, 2001/02–2011/12
Real price
Notes: Annual nominal prices of onion have been deflated by the general consumer price index, where
1995/1996=100.
Source: Production data from the Bangladesh Bureau of Statistics; price data from the Department of
Agricultural Marketing, Ministry of Agriculture. See Table A3.
Discrepancies in onion production statistics
The official source of agricultural statistics on cultivated area, production, and yields is the
Agriculture Wing of the Bangladesh Bureau of Statistics (BBS), Statistics Division, Ministry of
Planning. The Department of Agricultural Extension (DAE) of the Ministry of Agriculture also
reports these statistics. However, there are often major differences in the statistics provided by
these two government agencies. For example, the most recent BBS onion production estimate
for 2011/12 is 1,159 thousand metric tons while the DAE estimate is 64 percent higher at 1,899
6 The annual nominal prices of onion have been deflated by the general consumer price index (CPI base:
1995/96=100).
Page | 11
thousand metric tons (Figure 12). 7 During our consultations, DAE and Tariff Commission
officials said the discrepancy comes from the fact that the DAE makes its production estimates
immediately after harvest, when onions are wet and their leaves are still attached. The onions
weigh 30–40 percent more at this time than at a later stage when they are dry and leafless.
Production (mtric tons, thousands)
Figure 12. Discrepancies in estimates of onion production: BBS versus DAE
1,899
2,000
1,591
1,500
1,159
1,052
1,000
500
0
2010/11
2011/12
BBS
DAE
Source: Agricultural Statistics Wing, Bangladesh Bureau of Statistics (BBS), Ministry of Planning, and
Department of Agricultural Extension (DAE), Ministry of Agriculture.
Growth rates of onion production, area, and yields
Figure 13 shows the annual growth rates of production, area, and yields from 2004/05 to
2011/12. 8 Onion production grew at an annual rate of 7.3 percent, which is quite remarkable
even though the base year production level in 2004/05 was relatively low. The expansion of
onion cultivation area contributed to 53 percent of the production increase; the remainder (47
percent) was due to the increase in yields. This suggests that research can play an important
role in increasing onion production through productivity improvements.
For the current year (2012/13), the DAE website reports that the total production was 1.914 million metric tons.
The BBS estimate for 2012/13 is not yet available.
8 Least-square growth rates calculated by authors based on BBS data.
7
Page | 12
Figure 13. Annual growth rates of onion production, area, and yields, 2004/05 to
2011/12
8
7.3
7
Percent per year
6
5
3.9
4
3.5
3
2
1
0
Production
Area
Yield
Source: Estimated by the authors using data from the Bangladesh Bureau of Statistics. See Table A3.
Costs and profitability of onion production
We estimated costs and profitability of onion production based on data from the 2011–2012
Bangladesh Integrated Household Survey (BIHS), a nationally representative survey developed
and conducted by IFPRI-PRSSP that collected detailed plot-level data on agricultural production
practices and numerous other aspects of livelihoods of rural households. 9
Figure 14 provides the estimates of production costs and net profits from onion cultivation in
2012. The average cost of onion production on a cash-cost basis (that is, when imputed values of
land rent and family labor are not taken into account) was Tk 95,739/hectare; on a full-cost
basis (including the imputed values of land rent and family labor) the production cost is Tk
133,740/hectare. Net profit (gross revenue minus the cost of production) therefore was Tk
86,936/hectare on a cash-cost basis and Tk 48,935/hectare on a full-cost basis.
9
Total cost per hectare is obtained by adding the costs of: inputs (seeds, fertilizers, manure, and pesticides),
irrigation, seedling raising, equipment/bullock/mechanical power rentals, hired and family labor, and imputed land
rent for both farmer-owned and rented-in land. Dividing the cost per hectare by onion yield gives cost per metric ton
of onion. On the revenue side, average onion yield per hectare (9,689 kg) is multiplied by farmers’ average selling
price (Tk 18.85/kg) to calculate gross revenue or return per hectare in 2012. Dividing the gross revenue per hectare
by onion yield gives gross revenue per metric ton of onion. Subtracting the cost of production from gross revenue
gives the net profit of producing onion.
Page | 13
Figure 14. Cost of production of onion per hectare, 2012
133,740
140,000
Taka/hectare
120,000
100,000
95,739
86,936
80,000
48,935
60,000
40,000
20,000
0
Cash cost basis
Cost/hectare
Full cost basis
Net profit/hectare
Source: Estimated using data from the IFPRI-PRSSP 2011–2012 Bangladesh Integrated Household Survey.
The cost of producing one metric ton of onion can be viewed in terms of a break-even point,
which indicates the price a farmer must receive for their crop in order to cover costs. On a cashcost basis, the rate of profit per ton was quite high: 91 percent of the average cost per ton of
onion produced. Even when the imputed values of land rent and family labor were accounted
for in the cost calculations, the profitability was 37 percent of full cost of production per ton of
onion (Figure 15).
Figure 15. Cost of production of onion per metric ton, 2012
16,000
13,804
Taka/metric ton
14,000
12,000
10,000
9,882
8,973
8,000
5,051
6,000
4,000
2,000
0
Cash cost basis
Cost/ton
Full cost basis
Net profit/ton
Source: Estimated using data from the IFPRI-PRSSP 2011–2012 Bangladesh Integrated Household Survey.
Figure 16 presents input costs as percentages of both cash costs and full costs of onion
production per hectare. Labor has the biggest share of costs followed by seeds and seedlings.
Family labor and imputed land rent account for 16 percent and 11 percent of full costs,
respectively.
Page | 14
Percentage of total costs/hectare
Figure 16. Shares of input costs in cash and full costs of production of onion, 2012
40
35
30
25
34.7
32.0
25.1
23.1
20
15
10
16.4
13.8
10.0
11.2
8.4
6.1
5
7.2
5.2
2.2
1.6
1.8 1.3
0.0
0.0
0
Cash cost basis
Full cost basis
Source: Estimated using data from the IFPRI-PRSSP 2011–2012 Bangladesh Integrated Household Survey.
Will farmers grow more onion next year in response to the current price surge?
According to a recent estimate, the short-run price elasticity of onion supply is 0.23, meaning a
10 percent increase in price would induce farmers to produce 2.3 percent more onion. 10
Farmers will probably make their production decisions based on market price before the
planting season (around November).
At our request, DATA interviewed 25 selected farm households from those that participated in
the 2011–2012 BIHS. Twelve of the 25 households cultivated onions this year (harvested in
April 2013), and farmers in those households said they would substantially increase the area
under onion cultivation next year because of the expected high profits. Mofizul Islam, a farmer
from Kumarkhali Upazila of Kushtia District, said:
Of course I will cultivate more onion next year. Compared to other crops, onion is more
profitable. Market price remains between 800 and 1,000 taka per maund [37.32 kg]. For every
bigha [one-third of an acre], the yield is 30 to 40 maunds, and expenses are between 12,000 to
15,000 taka per bigha. So, the profit is almost double the production cost. However, if farmers
could get loans, then many more farmers could grow onion and much more area could be under
onion cultivation.
10
M. Yunus and Q. Shahabuddin, Farmers’ Supply Response to Prices and Non-Price Factors in Bangladesh, Policy
Research and Strategy Support Program Report (Dhaka, Bangladesh: International Food Policy Research Institute and
Bangladesh Institute of Development Studies, 2013).
Page | 15
Farmers who did not cultivate onion this year expressed a strong interest in producing it next
year with the expectation of high profits. “I will cultivate onion next year because the price is so
high. I regret that I did not grow [it] this year. I could earn a huge profit,” said Alamgir Hossain, a
farmer from Bhanga Upazila of Faridpur District.
How much onion produced domestically comes to the market?
The results of our analysis of the 2011–2012 BIHS data (presented in Figure 17) show that
onion has a high marketed surplus rate and suggest that it is a highly commercial commodity. 11
In 2012, onion farmers in Bangladesh sold about 86 percent of their gross onion production.
Figure 17. Uses of onion produced by Bangladeshi farm households
Percentage of total production
100
86.1
80
60
40
20
4.6
1.6
6.3
0.5
1.0
Damage
Stock
0
Payment for
land rent
Payment for Consumption
irrigation &
labor
Sold
(marketed
surplus)
Source: IFPRI-PRSSP 2011–2012 Bangladesh Integrated Household Survey.
Onion imports
Although the government imported onion from Myanmar in the last week of August 2013,
historically, India has been the only source of onion imports to Bangladesh. Second only to
China, India produces around one-quarter of the global onion supply and exports about 10
percent of its total onion output—much of it to Bangladesh, Malaysia, and Singapore. However,
recent drought-induced losses in India’s main producing regions, Maharashtra and Karnataka,
led the price of onion to rise sharply in July and August 2013. The National Horticultural
Research and Development Foundation of India recently predicted an estimated 10 percent
decrease in production. To stabilize the price of onion, India’s state-run trading agencies issued
import tenders in the last week of August 2013. The main importing firm—New Delhi-based
state-run National Agricultural Cooperative Marketing Federation of India—mentioned on its
website that it was exploring import potentials from China, Egypt, Iran, and Pakistan. Another
state-run international trading company based in New Delhi (PEC Ltd.) also saw interest from
international suppliers to supply 300,000 tons of onions.
11
We analyzed the use of onion produced by Bangladeshi farm households using data from the 2011–2012 BIHS,
which collected plot-level data on in-kind payments for land rent, irrigation, and labor use; crop production; input
use; farmers’ home consumption; loss/damage after harvest; farm-level stock; and the marketed quantity for one
year (from December 1, 2010, to November 30, 2011).
Page | 16
On August 14, 2013, amid concerns about the political repercussions of spiraling onion prices,
India’s Commerce Ministry set the minimum export price at US$650 per ton to discourage
exports and control rising prices. 12 This measure contributed to the price hike for Bangladeshi
onion importers.
To deal with the price surge, the Trading Corporation of Bangladesh decided to import 5,000
tons of onion from both India and Myanmar through private importers. 13 A September 17
newspaper article reports that, between end-August and mid-September, 2013, Bangladesh
imported 2,500 tons of onion from China, Myanmar, and Pakistan. 14 Since August 30, 2013, the
government has been selling onion directly to consumers through its open market sale program
at a fixed price of Tk 47/kg.
According to an official at the Tariff Commission, alternative sources of onion import are China,
Egypt, Malaysia, Myanmar, Pakistan, Turkey, and Vietnam, but the cost-effectiveness and
technical feasibility of importing from these countries needs to be carefully examined. Although
Myanmar is closest in proximity to Bangladesh and its current onion price is low compared to
India, the process of opening a letter of credit and settlement with Myanmar would be quite
cumbersome and time-consuming. This must be weighed against importing onion from
countries that are farther away, which would result in higher transit losses of the semiperishable crop.
Figure 18 shows the trends in monthly imports of onion from June 2011 to July 2013. The level
of import has fluctuated considerably during this period. It is quite puzzling that while onion
imports increased by 163 percent—from 24 thousand tons in April 2013 to 63 thousand ton in
July 2013—the price also sharply increased. From July to August 2013, however, onion imports
dropped by 63 percent.
Figure 19 shows the trends in annual imports of onion from 2005/06 to 2012/13 and illustrates
that imports have increased three folds during this period.
80
70
60
50
40
30
20
10
Aug-13
Jul-13
Jun-13
May-13
Apr-13
Mar-13
Jan-13
Feb-13
Dec-12
Oct-12
Nov-12
Sep-12
Aug-12
Jul-12
Jun-12
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
0
Jun-11
Imports (metric tons, thousands)
Figure 18. Trends in monthly onion imports, June 2011–July 2013
Source: Data from the Import Monitoring Section, Bangladesh Bank. See Table A4.
The minimum export price was US$250/ton on August 4, 2013, and jumped to US$400/ton just after the Eid
celebration on August 10.
13 To date, 500 tons have been imported from India, and another 100 tons are in the pipeline.
14 “Reliance is now on onion from Pakistan and Myanmar (translated),” Prothom Alo, September 17, 2013.
12
Page | 17
Figure 19. Trends in annual onion imports, 2005/06 to 2012/13
Imports (metric tons, thousands)
600
517
500
400
323
310
278
300
230
200
128
100
148
104
0
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
Source: Data from the Bangladesh Tariff Commission, Ministry of Commerce. See Table A5.
Onion availability for consumption
The annual onion availability for consumption in Bangladesh consists of net domestic
production plus imports. Based on this, we estimated onion availability for consumption at 1.3
million metric tons in 2011/12 (Figure 20). 15
Figure 20. Onion availability for consumption, 2011/12
Availabilty (metric tons,
thousands)
1,400
1,262
1,200
1,000
939
800
600
323
400
200
0
Net production
Import
Available for
consumption
Source: Estimated by the authors using data from the Bangladesh Bureau of Statistics.
15
Customarily in Bangladesh, the total of seed, feed, and wastage for foodgrains (such as rice and wheat) is
considered to be 10 percent, which is deducted from gross production to calculate net production. However, unlike
cereals, which are not perishable, onion is a semi-perishable commodity. There exists no standard for estimation of
net domestic onion availability for consumption. Without an available standard, we calculated the net production
quantity by deducting 20 percent from total onion production to account for seeds, excess moisture, and post-harvest
losses and taking into consideration the perishability of onion.
Page | 18
Onion Consumption
The Bangladesh Bureau of Statistics conducts the nationally representative household income
and expenditure survey (HIES) in both rural and urban areas every five years. This survey
covers household expenditures for food and non-food as well as quantities of food consumed.
Based on three rounds of HIES data, we estimated annual per capita onion consumption in
2000, 2005, and 2010. Figure 21 shows the trends at the country, rural, and urban levels for per
capita onion consumption, which increased by 46 percent nationwide from 2000 to 2010. Urban
residents eat more onions than rural households; in 2010, they consumed 40 percent more
onions per person than rural residents did.
Figure 21. Trends in per capita onion consumption per year, 2000, 2005, and 2010
Kilograms/person/year
12
7.7
8
6
10.2
9.4
10
5.6
5.0
6.8
6.0
8.2
7.3
4
2
0
2000
2005
Rural
Urban
2010
National
Source: Household Income and Expenditure Survey reports published in 2003 (for 2000 survey), 2007
(for 2005 survey), and 2011 (for 2010 survey) by the Bangladesh Bureau of Statistics.
Demand for Onion
There are differing estimates for the demand for onion in 2013. The Department of Agricultural
Extension provides two estimates—2.1 million metric tons and 2.7 million metric tons 16—while
the Tariff Commission estimated demand at 2.4 million metric tons in a recent position paper. 17
In an August 19 newspaper article, 18 a Ministry of Commerce official remarked that the
estimates for onion production differ drastically between the government agencies that provide
them (that is, DAE and BBS). The article stated that the Ministry was concerned that without
knowing the actual quantity of onion demand, it would not be able to determine how much
onion to import in order to contain the market price. Considering the need for this information,
IFPRI-PRSSP undertook an exercise to estimate aggregate demand for onion and make demand
projections.
The concept of demand is different from that of requirement. In economics, demand is a
consumer’s desire, willingness, and ability to pay a price for a specific good or service. 19 In our
Department of Agricultural Extension, Ministry of Agriculture.
Ministry of Commerce position paper prepared for the June 3, 2013, meeting at the Prime Minister’s Office.
18 “Ministry in Dark on Onion Production,” Dhaka Tribune, August 19, 2013.
19 The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship
between price and quantity demanded is known as the “demand relationship.” Movement along a demand curve due
16
17
Page | 19
analysis, we made onion-demand projections from 2010 to 2020. The estimate for change in
demand is based on changes in income and population, holding prices and other factors
constant at their 2010 levels. 20 We made per capita annual onion demand projections under two
scenarios on the growth of real per capita income. First, we envisage a business-as-usual
scenario, where the current trend in real (that is, inflation-adjusted) income growth of 3.6
percent per capita from 2000 to 2010 is expected to continue. 21 Second, we used an optimistic
scenario of 5 percent per capita real income growth.
Figure 22 presents the projected total demand for onion under the two income growth
scenarios from 2010 to 2020. 22 From the base year demand of 1.23 million metric tons, the
demand for onion is expected to increase to 1.86 million metric tons in 2020 (51 percent
increase) under the business-as-usual scenario and to 2.08 million metric tons (69 percent
increase) under the optimistic income growth scenario. The estimates show that the projected
demand of 1.3 million metric tons in 2012 under the business-as-usual scenario reflects the
availability of onion for consumption (net production plus import) of 1.3 million metric tons, as
shown in Figure 20.
Figure 22. Projected onion demand, 2010–2020
1,858
2,076
1,783
1,970
1,711
1,870
1,643
1,775
1,577
1,685
1,513
1,599
1,452
1,518
2011
1,394
1,441
2010
1,338
1,368
1,500
1,284
1,298
2,000
1,232
1,232
Onion demand (metric tons, thousands)
2,500
1,000
500
0
2012
2013
Business-as-usual scenario
2014
2015
2016
2017
2018
2019
2020
Optimistic income growth scenario
Source: Estimated by authors using data from the Bangladesh Bureau of Statistics and the World Bank.
to a change in the good’s price results in a change in the quantity demanded, not a change in overall demand. Rather,
a change in overall demand refers to a shift in the quantity demanded based on changes in factors other than the
price of the good. For example, if a person’s income increases, his demand is likely to increase. If the population
grows, demand will also increase. Demand can also change due to changes in taste and preference or changes in the
prices of related commodities.
20 We used the 2010 HIES estimate of actual per capita consumption (8.16 kg/year/person) as the base year demand.
For income, we used the gross national income per capita from the World Bank World Development Indicators. We
used 0.54 as the value of income elasticity of demand for onion.
21 A. Ganesh-Kumar, S. K. Prasad, and H. Pullabhotla, Supply and Demand for Cereals in Bangladesh, 2010–2030, IFPRI
Discussion Paper 1186 (Washington, DC: International Food Policy Research Institute, 2012).
22 To calculate the total demand for onion by the population, we have multiplied the annual per capita consumption
forecasts with the predicted annual population figures obtained from the World Bank.
Page | 20
Estimated Effects of Onion Imports on Market Price
Amid the onion price surge, the Trading Corporation of Bangladesh is importing 5,000 metric
tons of onion to dampen the domestic market price. But, specifically, what impact will this have?
We used a mathematical demand-supply model to estimate it under different scenarios (see
Appendix B for a description of the model and parameters used for the estimations).
The price of a commodity is determined by the interaction of its demand and supply in the
market. We assume that the retail market price of onion before the import (the “base price”) is
Tk 62/kg. If the entire quantity of imported onion is distributed in the country within a span of
one week, then the market supply of onion would increase by 5,000 metric tons, and the retail
price would drop to Tk 51/kg. However, if the imported quantity is distributed within a span of
two weeks, then the market price would only fall to Tk 56/kg. If no subsequent new supply
comes to the market after the 5,000 metric tons is exhausted, then the price would return to the
base level. These effects are calculated with the assumption that all other things (for example,
private imports, stocks held by farmers and traders, the transportation situation, income, prices
of other commodities, and additional factors) are held constant at the base level in order to
isolate the effects of the Trading Corporation of Bangladesh’s import from other factors.
We have presented the above analysis as an illustrative example. The same analytical model can
be used to estimate the simulated effects of changes in demand on prices.
What Contributed to the Steep Price Rise?
From our situation analysis as well as our review of recent media reports (see Appendix C), we
conclude that the main reason for the recent onion price surge was a decline in onion
production in India due to unfavorable weather conditions in its major onion production zones.
Based on the media reports from Bangladesh and India, it can be inferred that there is actually
an onion-price crisis in India as well.
Although onion imports in Bangladesh increased substantially from April to July 2013, onion
prices still rose sharply during this period. This was probably because Bangladeshi traders
anticipated a significant decline in imports of onion from India (due to the weather-induced
production shortfall there) so they began speculative stockpiling of the crop in order to make
extra profits. Once the Bangladesh government announced its decision to import onion from
sources other than India, traders began supplying the stored onions into the local market. As a
consequence, the price of onion showed a downward trend, but it was short-lived: prices began
to rise again as onion imports fell considerably once the Indian government raised their
minimum export price from US$250 per ton to US$650 per ton to discourage exports and
control rising onion prices in India.
Conclusions for Policy
The market supply of onion in Bangladesh declined not only because of the reduction in imports
from India but also because local traders took advantage of the situation by curbing the release
of their stored onions into the market in order to make extra profit. On August 17, 2013, the
Bangladesh government announced its decision to import onion from Myanmar. Following this
announcement, the market price of onion began to drop, likely because the traders supplied
their previously stored stock of onion into the local market. Despite this, onion prices started
rising again, but, this time, as a consequence of the significant reduction in imports.
We have drawn the following conclusions and short-, medium-, and long-term policy
recommendations regarding management of onion production and prices.
Page | 21
Short-term recommendations:
•
•
•
•
Bangladesh’s dependency on India as virtually the only source of onion imports makes the
country vulnerable. The government needs to carefully examine the feasibility of alternative
sources such as China, Egypt, Malaysia, Myanmar, Pakistan, Turkey, and Vietnam.
Although government imports have the potential to decrease market price, their expected
impacts on prices need to be more carefully assessed. While relatively small imports
distributed over a long period of time would not have much impact on the market price, too
much price reduction could create disincentive for farmers to produce onion.
Bangladesh is mostly dependent on onion imports between September and December.
Therefore, the government has to be vigilant during this period to prevent traders from
engaging in speculative storing during this period.
Timely provision of high quality inputs to farmers—particularly seeds, fertilizers, and
pesticides—is important for increasing domestic production of onion and reducing the
dependency on imports.
Medium-term policy recommendations:
•
•
The government should explore ways to promote more participation in the onion trade by
creating an enabling environment. This would increase competition in the supply market
and thereby erode the scope for seeking windfall profits through speculation.
Timely, adequate, and accurate information is the basis for policy formulation and decisionmaking, but there are often major discrepancies in the information and data on agricultural
production reported by the two government agencies responsible for collecting it—the
Bangladesh Bureau of Statistics (BBS) and the Department of Agricultural Extension (DAE).
Measures should be taken to reconcile the data reported by these agencies, improve their
quality, and minimize their delivery time.
Long-term policy recommendations:
•
The most efficient and sustainable way to tackle the onion crisis would be to mitigate
dependency on imports by taking steps to increase domestic onion production. Research
can play a pivotal role in this by finding ways to increase that production by improving
productivity. Since Bangladesh currently has very little fallow arable land available, future
production increases will have to come from higher yields of onion. This will mean
developing new technologies and innovations through research to address production
problems. Agricultural technologies can offer significant promise for augmenting onion
productivity, but only if they are disseminated to farmers through effective extension
systems and supported by appropriate policies and institutions.
Page | 22
APPENDIX A
Table A1. Daily wholesale and retail prices of local and Indian onions (taka/kg), July 1,
2012–September 16, 2013
Local
Date
1-Jul-12
2-Jul-12
3-Jul-12
4-Jul-12
5-Jul-12
8-Jul-12
9-Jul-12
10-Jul-12
11-Jul-12
12-Jul-12
15-Jul-12
16-Jul-12
17-Jul-12
18-Jul-12
19-Jul-12
22-Jul-12
23-Jul-12
24-Jul-12
25-Jul-12
26-Jul-12
29-Jul-12
30-Jul-12
31-Jul-12
1-Aug-12
2-Aug-12
5-Aug-12
6-Aug-12
7-Aug-12
8-Aug-12
12-Aug-12
13-Aug-12
14-Aug-12
22-Aug-12
23-Aug-12
26-Aug-12
28-Aug-12
29-Aug-12
30-Aug-12
1-Sep-12
2-Sep-12
3-Sep-12
4-Sep-12
5-Sep-12
6-Sep-12
9-Sep-12
10-Sep-12
11-Sep-12
12-Sep-12
13-Sep-12
Wholesale
25
25
25
25
25
25
25
25
25
25
26
26
26
25
25
26
26
26
26
25
25
25
24
24
24
24
24
24
24
24
24
25
25
25
25
25
25
25
22
23
23
22
22
22
21
21
22
21
21
Indian
Retail
28
28
28
28
30
28
28
30
30
30
30
30
30
30
32
32
30
32
30
32
30
30
30
28
30
28
28
30
28
28
28
32
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
Wholesale
16
16
18
18
18
18
18
18
18
18
19
19
17
17
17
17
17
17
16
16
16
16
15
15
15
16
16
16
14
15
15
18
16
16
17
18
18
18
16
16
16
16
16
16
15
15
17
17
16
Retail
22
22
22
22
24
24
24
22
22
24
24
24
24
24
24
24
22
24
22
22
22
20
20
20
20
20
20
20
20
20
20
20
20
22
22
22
24
24
22
22
23
22
23
22
20
22
22
22
22
Page | 23
Local
Date
16-Sep-12
17-Sep-12
18-Sep-12
19-Sep-12
20-Sep-12
23-Sep-12
24-Sep-12
25-Sep-12
26-Sep-12
27-Sep-12
30-Sep-12
1-Oct-12
2-Oct-12
3-Oct-12
4-Oct-12
8-Oct-12
9-Oct-12
10-Oct-12
11-Oct-12
14-Oct-12
15-Oct-12
16-Oct-12
17-Oct-12
18-Oct-12
21-Oct-12
22-Oct-12
23-Oct-12
25-Oct-12
29-Oct-12
30-Oct-12
31-Oct-12
1-Nov-12
4-Nov-12
5-Nov-12
6-Nov-12
7-Nov-12
8-Nov-12
11-Nov-12
12-Nov-12
13-Nov-12
14-Nov-12
15-Nov-12
18-Nov-12
19-Nov-12
20-Nov-12
21-Nov-12
22-Nov-12
26-Nov-12
27-Nov-12
28-Nov-12
29-Nov-12
2-Dec-12
3-Dec-12
4-Dec-12
5-Dec-12
Wholesale
22
22
21
21
21
22
22
22
22
22
22
22
22
22
22
23
25
25
25
26
28
29
29
29
28
28
27
28
28
30
31
30
31
31
35
35
35
35
35
35
33
34
35
35
35
36
36
38
40
40
40
40
40
40
40
Indian
Retail
30
28
28
28
28
28
28
28
28
28
28
28
28
28
28
30
30
30
30
34
32
34
34
35
35
34
34
36
35
38
36
36
35
35
40
40
42
42
42
44
42
42
44
42
42
42
42
44
45
48
48
48
46
46
46
Wholesale
16
15
15
15
14
14
14
14
16
15
15
15
15
17
18
18
18
19
18
18
20
23
24
24
24
24
24
20
20
24
24
24
26
24
27
27
27
28
28
28
24
25
25
25
25
25
25
30
34
34
34
30
30
30
30
Retail
22
20
20
20
20
20
20
20
20
20
20
20
20
21
22
22
22
24
24
24
24
24
27
27
28
28
28
26
28
28
28
28
30
30
30
32
32
32
32
30
30
30
32
28
30
30
30
34
36
38
38
35
33
35
32
Page | 24
Local
Date
6-Dec-12
9-Dec-12
10-Dec-12
11-Dec-12
12-Dec-12
13-Dec-12
17-Dec-12
18-Dec-12
19-Dec-12
20-Dec-12
23-Dec-12
24-Dec-12
26-Dec-12
27-Dec-12
30-Dec-12
31-Dec-12
1-Jan-13
2-Jan-13
3-Jan-13
6-Jan-13
7-Jan-13
8-Jan-13
9-Jan-13
10-Jan-13
13-Jan-13
14-Jan-13
15-Jan-13
16-Jan-13
17-Jan-13
20-Jan-13
21-Jan-13
22-Jan-13
23-Jan-13
24-Jan-13
27-Jan-13
28-Jan-13
29-Jan-13
30-Jan-13
31-Jan-13
3-Feb-13
4-Feb-13
5-Feb-13
6-Feb-13
7-Feb-13
10-Feb-13
11-Feb-13
12-Feb-13
13-Feb-13
14-Feb-13
17-Feb-13
18-Feb-13
19-Feb-13
20-Feb-13
24-Feb-13
25-Feb-13
Wholesale
40
45
48
50
50
50
50
52
56
56
34
46
28
28
28
26
26
24
24
24
22
23
21
22
22
22
24
22
22
20
18
19
19
19
18
18
25
26
27
25
24
24
20
24
30
28
27
28
28
28
28
30
31
30
28
Indian
Retail
46
50
55
52
55
55
60
60
60
60
44
60
40
40
40
38
38
35
35
35
30
30
30
30
30
28
28
28
28
28
28
28
26
26
28
28
30
35
33
33
35
35
32
30
43
38
36
35
34
35
35
35
35
32
32
Wholesale
30
30
31
34
35
34
34
36
30
30
27
30
26
26
26
26
23
25
25
23
24
24
26
26
26
25
26
26
25
27
27
25
25
24
24
24
30
33
34
40
38
35
30
30
40
38
38
37
35
32
30
33
33
32
30
Retail
32
34
34
38
38
38
38
38
35
35
35
40
32
32
30
30
30
30
30
30
30
30
30
30
30
32
32
32
32
34
34
34
32
30
32
33
36
34
36
45
45
45
43
43
48
46
45
45
42
40
40
40
38
36
36
Page | 25
Local
Date
26-Feb-13
27-Feb-13
28-Feb-13
3-Mar-13
4-Mar-13
5-Mar-13
6-Mar-13
7-Mar-13
10-Mar-13
11-Mar-13
12-Mar-13
13-Mar-13
14-Mar-13
18-Mar-13
19-Mar-13
20-Mar-13
21-Mar-13
24-Mar-13
25-Mar-13
27-Mar-13
28-Mar-13
31-Mar-13
1-Apr-13
2-Apr-13
3-Apr-13
4-Apr-13
7-Apr-13
8-Apr-13
9-Apr-13
10-Apr-13
11-Apr-13
16-Apr-13
17-Apr-13
18-Apr-13
21-Apr-13
22-Apr-13
23-Apr-13
24-Apr-13
25-Apr-13
29-Apr-13
30-Apr-13
2-May-13
5-May-13
6-May-13
8-May-13
9-May-13
12-May-13
13-May-13
15-May-13
16-May-13
19-May-13
20-May-13
21-May-13
22-May-13
26-May-13
Wholesale
25
20
18
20
22
28
24
24
24
24
22
22
24
24
24
24
24
24
23
20
20
22
20
20
18
18
18
18
20
21
21
18
18
18
17
18
22
23
23
22
24
24
24
24
23
23
24
24
24.5
25
25
25
24
25
26
Indian
Retail
30
28
28
30
30
33
35
33
30
30
30
30
30
30
30
28
28
28
28
25
25
25
25
25
25
25
24
25
25
24
24
22
22
22
22
24
28
28
28
28
28
28
28
30
28
28
28
30
30
30
28
30
30
28
30
Wholesale
27
28
28
28
30
32
32
30
30
29
26
18
24
24
24
20
20
18
18
20
20
20
20
20
20
18
18
18
18
18
18
18
18
18
17
17
22
20
20
20
22
21
22
22
21
20
20
20
18
18
18
18
18
18
19
Retail
35
32
32
32
32
35
35
35
34
35
34
32
32
32
32
30
30
28
25
25
25
25
26
26
26
26
26
26
26
26
26
24
24
24
23
24
25
25
25
25
25
25
26
28
25
26
26
26
26
26
26
25
25
25
26
Page | 26
Local
Date
29-May-13
30-May-13
2-Jun-13
3-Jun-13
4-Jun-13
9-Jun-13
10-Jun-13
11-Jun-13
12-Jun-13
16-Jun-13
17-Jun-13
20-Jun-13
23-Jun-13
24-Jun-13
26-Jun-13
27-Jun-13
30-Jun-13
1-Jul-13
2-Jul-13
3-Jul-13
4-Jul-13
8-Jul-13
9-Jul-13
10-Jul-13
11-Jul-13
14-Jul-13
15-Jul-13
16-Jul-13
17-Jul-13
18-Jul-13
21-Jul-13
22-Jul-13
23-Jul-13
24-Jul-13
25-Jul-13
28-Jul-13
29-Jul-13
30-Jul-13
31-Jul-13
1-Aug-13
4-Aug-13
5-Aug-13
7-Aug-13
11-Aug-13
12-Aug-13
13-Aug-13
14-Aug-13
18-Aug-13
19-Aug-13
20-Aug-13
21-Aug-13
22-Aug-13
25-Aug-13
26-Aug-13
29-Aug-13
Wholesale
26
26
26
26
27
27
27
27
32
32
32
34
33
33
34
33
35
35
38
37
37
38
40
41
40
40
39
40
40
40
39
39
38
40
40
39
40
42
44
43
43
43
44
44
55
55
52
64
64
62
57
55
54
50
52
Indian
Retail
28
28
30
32
33
32
33
34
35
35
36
36
36
36
38
38
40
40
42
40
42
42
45
46
46
45
48
48
46
48
45
45
44
44
44
45
46
48
48
48
48
48
48
48
60
60
60
70
70
70
65
62
60
60
58
Wholesale
22
21
21
21
21
20
20
21
22
22
22
24
24
24
30
30
30
30
35
35
35
35
37
38
38
38
36
36
36
36
34
32
32
35
35
35
38
38
41
41
41
41
45
42
55
55
60
70
70
70
60
60
58
57
54
Retail
26
26
25
28
28
28
30
28
28
28
28
30
30
30
32
32
32
34
36
38
40
40
42
42
42
42
44
44
42
44
42
42
40
40
40
40
42
42
42
42
42
42
46
46
58
58
62
78
74
75
74
68
65
65
62
Page | 27
Local
Date
Wholesale
Retail
Wholesale
1-Sep-13
52
60
53
2-Sep-13
52
60
53
3-Sep-13
52
60
53
4-Sep-13
52
58
53
5-Sep-13
53
58
50
8-Sep-13
54
60
52
9-Sep-13
54
60
52
10-Sep-13
54
62
52
11-Sep-13
56
60
55
12-Sep-13
56
62
60
15-Sep-13
60
68
70
16-Sep-13
60
70
74
Source: Department of Agricultural Marketing, Ministry of Agriculture.
Indian
Retail
60
60
60
60
60
60
62
62
60
62
78
80
Page | 28
Table A2. Monthly wholesale and retail prices of local and Indian onion (taka/kg), July
2010–August 2013
Local
Date
Wholesale
Retail
Wholesale
Jul-10
21
24
17
Aug-10
22
24
17
Sep-10
23
26
21
Oct-10
28
32
28
Nov-10
37
40
36
Dec-10
34
38
34
Jan-11
37
41
34
Feb-11
37
31
32
Mar-11
18
22
17
Apr-11
16
21
14
May-11
20
23
16
Jun-11
22
24
17
Jul-11
28
29
22
Aug-11
32
33
27
Sep-11
35
37
30
Oct-11
32
35
26
Nov-11
27
30
23
Dec-11
18
22
19
Jan-12
11
13
15
Feb-12
13
16
16
Mar-12
18
21
16
Apr-12
16
20
14
May-12
20
24
16
Jun-12
22
25
16
Jul-12
26
30
19
Aug-12
26
30
18
Sep-12
26
30
19
Oct-12
28
33
23
Nov-12
40
42
28
Dec-12
41
47
34
Jan-13
27
32
30
Feb-13
30
35
37
Mar-13
26
30
29
Apr-13
21
25
21
May-13
25
29
22
Jun-13
31
34
24
Jul-13
42
45
35
Aug-13
44
48
41
Source: Department of Agricultural Marketing, Ministry of Agriculture.
Indian
Retail
20
20
24
30
39
41
38
30
21
17
19
21
26
30
35
31
28
23
18
19
18
17
19
19
23
22
23
27
33
38
34
41
33
25
26
27
41
41
Page | 29
Table A3. Onion production, area, and yields in Bangladesh
Year
Production in
metric tons
(thousands)
Area in acres
(thousands)
Yield (metric
tons/acre)
2001–02
150
91
1.6
2002–03
153
93
1.6
2003–04
272
128
2.1
2004–05
589
213
2.8
2005–06
769
286
2.7
2006–07
894
318
2.8
2007–08
889
309
2.9
2008–09
735
266
2.8
2009–10
872
291
3.0
2010–11
1,052
312
3.4
2011–12
1,159
335
3.5
Source: Yearbook of Agricultural Statistics of Bangladesh, Bangladesh Bureau of Statistics.
Page | 30
Table A4. Monthly onion imports, June 2011–July 2013
Date
Onion import in
metric tons
(thousands)
Jun-11
32
Jul-11
43
Sep-11
25
Oct-11
36
Nov-11
32
Jan-12
19
Feb-12
15
Mar-12
18
Apr-12
36
May-12
44
Jun-12
55
Jul-12
72
Aug-12
52
Sep-12
61
Oct-12
47
Nov-12
55
Dec-12
28
Jan-13
35
Feb-13
25
Mar-13
32
Apr-13
24
May-13
35
Jun-13
51
Jul-13
63
Aug-13
23
Source: Import Monitoring Section, Bangladesh Bank.
Page | 31
Table A5. Annual onion imports, 2005/06–2012/13
Date
Onion import in
metric tons
(thousands)
2005/06
128
2006/07
104
2007/08
148
2008/09
230
2009/10
310
2010/11
278
2011/12
323
2012/13
517
Source: Bangladesh Tariff Commission, Ministry of Commerce.
Page | 32
APPENDIX B
An Analytical Model for Estimating the Effects of a Supply Shift on Onion Price
The model is within the Marshallian framework of partial equilibrium analysis and based on an
analytical framework that takes into account the fact that a share of total food production in
developing countries is consumed by producers themselves. 23 The model is based on the
assumption that the market for food crops produced by numerous small growers and sold to a
mass of consumers is competitive. This implies that the crop prices are set by demand and
supply in the domestic market. The analytical model is graphically illustrated in Figure B1, and
the mathematical formulation of the model is below.
We undertake this analysis for the Bangladesh domestic onion market. In Figure B1, the vertical
line DhH represents the onion demand curve of producers for home consumption. This demand
curve is drawn as insensitive to changes in onion price. The vertical demand curve for
producers’ home consumption represents the amount of onion consumed by the surplus
farmers and the total quantity produced by the deficit farmers. The horizontal distance between
the demand curve for farmers’ home consumption (DhH) and the market demand curve (DmD0)
measures the quantity of onion bought by consumers. This quantity called the “gross marketed
surplus” is supplied by the surplus onion producers.
The supply curve for onion OS0 represents the aggregate supply of onion from domestic
production. Imports of onion will induce a shift in the onion supply curve. While the market
equilibrium before the supply shift of onion is at A, the market equilibrium is established at B
after the rightward shift in the aggregate supply curve from OS0 to OS1.
To quantify the impact of the supply shift for onion, a mathematical treatment of the above
relationship is developed. Assuming a constant price elasticity of demand, the market demand
function can be represented as
(1)
q = ap −ε ,
where p and q are the price and quantity demanded of onion, respectively. The constant a
includes demand shifters, and ε is the price elasticity of demand.
A constant elasticity supply function for onion without a shift in supply can be expressed as
(2)
q = bp β ,
where p and q are the price and the quantity supplied, b includes supply shifters, and β is the
price elasticity of supply.
Assuming an m shift in demand schedule, the new demand function can be expressed as
(3)
q = a (1 + m) p −ε .
23 A. U. Ahmed and R. K. Sampath, “Effects of Irrigation-Induced Technological Change in Bangladesh Rice
Production,” American Journal of Agricultural Economics 74, no. 1 (1992): 144–57.
Page | 33
Figure B1. Effects of a change in onion supply on market price of onion
Price of onion
Dh
Dm
S0
S1
A
P0
B
P1
D0
0
H
Q0
Q1
Quantity of onion
If the import of onion results in a k shift in onion supply schedule, then the new supply function
can be expressed as
(4)
q = b(1 + k ) p β
The two equilibrium prices of onion (P0 and P1), without the supply shift and with the supply
shift, respectively, can be derived by equating equations (1) and (2) and (3) and (4) and solving
them for P0 and P1. Thus,
a
P0 =
b
1 /( β + ε )
(5)
(6)
, and
1+ m
P1 = P0
1+ k
1 /( β +ε )
.
Similarly, we can obtain the equilibrium quantities of onion (Qo and Q1) with the supply shift as
(7)
Q0 = a β /( β + ε )bε /( β + ε ) , and
Page | 34
(8)
Q1 = Q0 (1 + m) β /( β +ε ) (1 + k ) ε /( β +ε ) .
with subscripts 0 and 1 indicating the situations without and with the supply shift, respectively.
Assumptions and parameters used for the present exercise
•
•
•
•
•
•
For estimating the value of the supply shift parameter (k), we used the import of 5,000
metric tons of onion by the Trading Corporation of Bangladesh.
For estimating the impact of imports on the market price of onion, we assume no shift in the
demand for onion; therefore, the value for m is set at 0.
We used the predicted 2013 consumption of 1.394 million metric tons of onion as the
baseline quantity (Q0).
We used the retail price of Tk 62/kg prevailing on August 29, 2013, as the base price.
We used 0.82 as the value of price elasticity of demand for onion.
Since domestic production of onion will not change in response to the high price before next
year, we used a low value of 0.1 for the price elasticity of supply. We did not set the value at
zero because farmers and traders are likely to release their onion stock in response to the
high price.
Page | 35
APPENDIX C
Media Report on the Onion Price Situation
COVERAGE IN BANGLADESH
August 27, 2013:
From the Indian news agency Press Trust of India: The sudden price hike can be attributed to
India’s Commerce Ministry’s recent notification to impose a minimum export price of $650 per
ton on onion to restrict shipments and control rising prices.
August 26, 2013:
The Financial Express reported that at a joint meeting of the Ministry of Commerce and the
Chittagong Chamber of Commerce and Industry (CCCI) held in the CCCI auditorium on the
previous evening (Sunday, August 25), Mr. Mahbubul Alam, president of CCCI, called to
investigate the reason behind onion price hike as its price was very much normal during the
entire month of Ramadan. The article quoted the importers in Chittagong stating that the onion
price is unlikely to further increase as there is adequate supply and several hundred tons are
expected to reach the market within the next three or four days.
From a report by Samakal, a daily Bangla newspaper: Five containers of onion from China
arrived in the Chittagong port and were unloaded on August 25, 2013.
From the news agency United News of Bangladesh: On Sunday, August 25, 2013, a Commerce
Ministry official held a meeting with importers and leaders of CCCI in Chittagong to find out
ways to keep the market stable before Eid and Puja. The official was quoted as saying: “The
import of onion, a key cooking ingredient, from neighboring country Myanmar has started to
ensure sufficient supply in the overheated market ahead of Eid-ul-Azha.”
August 22, 2013:
From a report in Prothom Alo, a leading daily Bangla newspaper: With a reduction in onion price
in India and import of onions starting over the last few days, the price of the commodity in the
wholesale market in Bangladesh has started falling although it has minimal effect on the retail
market. At the wholesale market at Shyambazar, the price of onion, both imported from India
and locally produced in the country, showed a receding trend in the wholesale market.
However, the reduced price at the wholesale market has no effect on general buyers as it is
being sold at a higher price in the retail market. At Kawran Bazar on August 21, 2013, Indian
onion was sold for Tk 78 to Tk 80 per kilogram while the locally produced onion was between
Tk 68 and Tk 70 per kilogram.
From an article in the Daily Star: Onion prices have started coming down in the local market
with an increased supply from India as imports resumed through land ports on Wednesday,
August 21, 2013, after a lull of two days. At wholesale markets in Dhaka, onion was selling at Tk
2,100 per maund [37.32 kg] yesterday [Wednesday], a fall by 22.22 percent from the previous
day, according to the traders.
From the Financial Express: The price of onion in the wholesale market is declining but it is yet
to come down to a tolerable level in the retail market of the capital. The newspaper expressed
its optimism that the first import consignment of onion of 5,000 tons would arrive next week,
which would help further ease the onion prices.
From the Independent: Onion import through Hilli land port restarted after two days on Tuesday
[August 20] afternoon as traders agreed to import onion with increased price. As the import
Page | 36
resumed, the price started decreasing in wholesale markets in the northern district including
Dinajpur.
August 21, 2013:
From Prothom Alo: With the decision by the government to import 5,000 tons of onion from
India and Myanmar, the onion price has reduced by Tk 600–700 at Sathia and Sujanagar
Upazilas of Pabna District, the largest producer of onion. At Sathia’s Karmaja haat [market],
onion was being sold between Tk 2,000 and 2,200 per maund on Tuesday [August 20] compared
to Tk 2,600 to 2,700 on the previous day.
From Ittefaq, a daily Bangla newspaper: There was an onion surplus of four lakh metric tons in
the country. The annual demand being 20 lakh tons and annual production was 19 lakh 14
thousand tons. And as per Bangladesh Bank sources, another five lakh tons were imported in
the last fiscal year. The report said that a section of unscrupulous traders have increased onion
price by taking advantage of the onion crisis in India. The present stock of onion in the country
will last for another three months.
August 20, 2013:
From the Financial Express: Onion prices are unlikely to rise further in Bangladesh as supplies
have started going up in India. It has prompted the downtrend in prices in the wholesale and
retail outlets in several regions in India, market monitors said. Bangladesh imports some
600,000 tons of onion a year, mainly from India, to meet its annual demand of 1.5 tons against
local production of 900,000 tons, according to officials from the Ministry of Commerce.
From the daily Ittefaq: Import of onion through Hilli land port in Dinajpur stopped as hundreds
of trucks with Indian onion were found waiting at the port since Sunday. The price of onion
increased in India over the last few days, and the Indian central government is discouraging
onion export to Bangladesh. Bangladeshi importers opened letters of credit at the rate of
US$350 per ton of onion while the Indian government fixed a ceiling of onion export to the tune
of US$650 per metric ton.
August 19, 2013:
From the Dhaka Tribune: Prices of onion increased by 43 percent in the past three days in the
local markets because the price in international markets rose to US$650 per ton on August 14.
The Commerce Ministry appeared unaware of the country’s onion production and demand as
the two government agencies [responsible for recording this information] gave different figures
in the wake of skyrocketing onion prices. “We cannot finalize the demand and production of
onion because there is this big difference of 700,000 tons between what the Agriculture
Ministry and Bangladesh Bureau of Statistics says,” said a senior official of the Commerce
Ministry.
From the Daily Star: Indian exporters were taking back onion-laden trucks from land ports and
asked Bangladeshi importers to hike prices. “Even yesterday, large shipments of onion were
waiting at Indian land ports to enter Bangladesh, but those were taken back and sold in the local
[Indian] markets at higher prices,” said Khandakar Babul, general secretary of Dhaka
Mahanagar Krishipanno Amdanikarok Association, a platform of perishable goods importers.
August 18, 2013:
From Prothom Alo: To tackle the onion situation, the Commerce Ministry advised onion
importers to look for other neighboring countries besides India to import onion in view of the
price spike. The government also considered importing onion through the Trading Corporation
of Bangladesh. Commerce Secretary Mahbub Ahmed, however, said that the price of onion has
Page | 37
started reducing in India. The present onion stock in the country is satisfactory. The report
quoted Trading Corporation of Bangladesh (TCB) Chairman Sarwar Jahan Talukder as saying
that TCB would continue to import onion until the market stabilizes. TCB would be importing
5,000 tons of onion from India and Myanmar. “Indian exporters have sold the onions, which
were supposed to arrive in Bangladesh, in their local market as prices soared there too,” claimed
Vice President of Federation of Bangladesh Chamber of Commerce and Industry Helal Uddin,
after a meeting with the secretary of commerce on Saturday, August 17.
From the daily Samakal: The Commerce Secretary said there is sufficient stock of onion in the
country. The Bangladesh Bank and the Agriculture Ministry stated that the onion production in
the country this year was 19 lakh 14 thousand tons. Another five lakh tons were imported,
which is more than the country’s annual consumption. According to them, the market would be
stable in a few days.
COVERAGE IN INDIA
Similar to the situation in Bangladesh, the Indian media also carried news extensively on the
onion price situation, which can literally be a political game changer: In 1998, the heavy losses
suffered by the Bharatiya Janata Party in Delhi state elections were widely blamed on high
onion prices.
This August, with angry lawmakers protesting in Indian Parliament, the government was forced
to announce steps to curb price rises. It banned onion exports for two weeks then hiked the
minimum export price to discourage exports. At the time of this publication, India was
considering importing onions from Pakistan. The Indian government claimed that there was no
shortage and it blamed rising prices on traders, accusing them of hoarding stocks to push up
prices. It said it will import onions from Pakistan, China, Iran, and Egypt to ease pressure.
With production of some 16 million tons a year, India has a 19 percent share of the global onion
production, second only to China, which yields nearly 21 million tons annually. The United
States is the third-largest onion producer with yields of nearly 4 million tons, according to US
Department of Agriculture.
August 28, 2013:
From the Wall Street Journal (“India’s Onion Prices Play Pivotal Role in Election”): India’s
struggle with a plunging currency, decrepit infrastructure, and government corruption. But at
the top of the pre-election agenda now: the price of onions and wheat. On Tuesday, August 27, a
day after India's lower house of Parliament passed a sweeping food aid bill that would
guarantee subsidized grain for nearly 70 percent of the country's citizens, the upper house was
busy debating the cost of onions.
Page | 38
August 23, 2013:
From Voice of America (“Spiraling Onion Prices Worry Indian Government”): India's main
opposition party, Bharatiya Janata Party, hopes to cash in on voter disgruntlement over high
onion prices as it gears up for state elections due in Delhi later this year. Onions have become
the centerpiece of their campaign to slam the government for mismanaging the economy and
failing to protect the interests of poor people. To woo voters, it has set up stalls to sell onions at
rates significantly lower than the market price in New Delhi. High onion prices helped former
Prime Minister Indira Gandhi wrest back power in 1980, and they were largely responsible for
the defeat of the Delhi state government 15 years ago.
A report said that the Indian government shortlisted Pakistan among the countries from where
it plans to import onions in order to tide over the shortage of the staple. On Wednesday, August
21, the Centre settled the import option, identifying China, Iran, and Egypt in addition to
Pakistan to source onions and help ease the domestic supply shortage.
August 20, 2013:
From the Times of India: Onion prices started falling as supplies started growing in Delhi
following new crop harvest. The supply rose to 900 tons on Monday, August 19, at Lasalgaon,
against 458 tons a week ago. The supply in Pimpalgaon and Delhi rose to some 2,200 tons.
From India Real Time ("Onion Diplomacy between India and Pakistan”): Tensions between India
and Pakistan were running high over border clashes in Kashmir, but a crippling shortage of
onions in India forced New Delhi to turn to Islamabad for help, though not everyone’s happy
about going cap-in-hand to the neighboring sparring partner. Separately, private traders in
India have also been importing from Pakistan, but some have stopped in protest of the alleged
killing of Indian soldiers on the Kashmir border by Pakistani troops earlier this month.
August 15, 2013:
From the Times of India (“Amid LoC firing, India Plans to Buy Onions from Pakistan”): India
exported 6.39 lakh tons of onions from April through July, compared to 6.94 lakh tons in the
same period one year ago. Production stood at 16.6 million tons in 2012–2013.
Page | 39
Akhter U Ahmed