Sri Lanka: Oversupply hits onion market

The price of onions at the Dambulla Special Economic Centre remains low, despite the intervention of the Government to increase the import tariff. Farmers said that they are incurring huge losses selling their harvest. Big onion harvesting has commenced in the Matale district and the price has fallen due to oversupply. On Friday onions were traded at Rs. 40-52 ($0.30-40 US) per kg at the Dambulla market while the Government purchased it at Rs. 55 per kg through Lak Sathosa.

A farmer organisation chairman, R.D. Herath said that farm gate prices had fallen below Rs. 40 per kg, which is below the cost of production. "To earn a reasonable profit the price should be above Rs. 55 per kilo," he said.

Farmers had to pump water this year as a result of drought conditions. However, the rising cost of fuels ensured that production costs rose significantly.

On August 13, the Government increased the import duty on onions by Rs. 25 to reduce imports and to keep the wholesale price up. On Friday there were no imported onions at the Pettah wholesale market and the total supply was from local farmers. Prices at the Pettah wholesale market were between Rs. 45-60 per kg. A trader at the Pettah market said that onions, which come to the market in several grades, are based on the size and small onions fetch a lower price - around Rs. 40 per kg. "The price is determined here by supply and demand and we cannot increase the price."

The dry weather conditions mean that the quality of onions is high this year and it is thought that farmers who can store their produce for a time will be able to atract better prices soon.

Market analysts say that import controls can not alone address the issue. Lack of storage facilities and poor knowledge of post harvest handling are other issues. The supplies to the Colombo wholesale market comes through intermediaries in the supply chain and therefore the farmgate price is far below the wholesale price.

Source: sundayobservor.lk