As always, the weather, the market, and various parts of the business world can greatly affect the onion market. Here is the Onion Market update as of September 8, 2014:
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As always, the weather, the market, and various parts of the business world can greatly affect the onion market. Here is the Onion Market update as of September 8, 2014:
Market: Packing is at full swing at most packing sheds here in the Northwest. While harvest is just beginning here in the Treasure Valley, Washington has been going hard for about a week.
Yields: Yields in Washington are about average somewhere in the 700-750 cwt range. Harvest is approaching the 25-30% completion at this point. Reds and whites are the bright spot in the market with prices in the double digits for whites with reds not too far behind.
Yields in Idaho/Oregon have been a bit light to start with, mostly as a result of IYSV and lack of water. Many shippers are offering smaller sized onions than what they are used to. This is adding some down pressure to the market, especially among the smaller sizes.
Freight: A continued lack of drivers continues to demand very strong freight prices. Prices are similar, at this point, to what they were during this time last year, but there is even less negotiation when it comes to rates. East coast rates for refers can be as high as $8-$8.50 for refrigerated trucks. If you are able, utilizing flat beds at this juncture in the season could save you as much as 15-20%.
5-6 days prior to these pictures being taken, this field was full, lush, and green. Now, after the pea plants have been cut, placed in rows, and dried by our Oregon sun, they are ready to be put through the combine to separate the chaff from the seeds.
Owyhee Produce partners with farms in the mid west to provide them with the pea seeds they need to grow peas in their fields. Our climate is not conducive to growing peas, and the midwest doesn’t have a climate that can grow great seeds. Each area has been able to use their climate to the best of its ability by partnering together for the best possible result.
Before running the combine over the field, the moisture level is checked using the above canister to make sure the seeds have a moisture content under 14%. Anything over 14% will lead to the seeds molding during transportation.
As the combine runs over each row, everything is picked up by the rotating feeder at the front. As soon as the chaff and seeds enter the machine, they begin a process of separation. The rotating, back and forth motion within the combine shakes the chaff off of the seed. The lightweight chaff is pushed over the top and out the back of the machine, while the heavier seeds are kept and compiled behind the cab.
After making a full run and filling the combine, the seeds are transferred to a truck in the field. That truck is taken to our facilities and the product is put in bins to be shipped and stored in Ontario. The seeds go through a super fine cleaning and two tests, one for germination and one for purity. Its imperative that the seeds are able to reproduce a fresh pea variety, and that the group of seeds are of one single variety. The seeds will then be re-grown and harvested as fresh peas next season.
While California is short on water, as far as onions are concerned, it looks like they will not be short on supply. Much like the case in many onions regions, onions are the number one cash crop and consequently are the last to go without water.
Oregon and Idaho are in similar situations as far as water is concerned, although the NW is much further from harvest compared to California. In the Snake River Valley that runs through Eastern Oregon and Western Idaho, there are thousands of acres left fallow this year. That doesn’t mean there are no onions planted in valley regions though. In fact, it is because of these fallow lands that many farms are still hoping to be able to finish their onion crop. By taking water normally allotted for these fields that are not being irrigated, they are hoping to finish their onion crop. It is not so much a question now of the quantity of water available to these farmers, instead it is a function of the length of time that the water will be flowing for irrigation. Some estimates are saying July 27th others are speculating water availability until August 10th. It doesn’t seem like much, but the 14 days in difference between the 27th of July and the 10th of August will literally make or break the onion crop on thousands of acres.
Transportation is currently a major issue and will continue to be a MAJOR challenge for the foreseeable future. Reefer rates from California to East Coast locations are as high as $9,000 -$10,000 and even more so are hard to find. Railex is helping to alleviate some of this pressure for those that can use its service.
Prices have firmed up significantly on all colors and sizes over the past 2 weeks. This is due in part to the Imperial Valley finishing up and reduces the number of shippers with product available for shipment. July is traditionally the most expensive onion month of the summer with low double digits quite common. It looks like this may be the case this year as well, but only time will tell.
Shay- The best time for a customer to come to me for a contract is a month or more before my planting season even starts. There are many ways to grow an onion: you can focus on size, single centers, storability, sweetness, pungency, duration of season, or any other variable. If I know what to grow and how to grow it, I can assure the best results for my customers. That is why buying from a true grower/shipper/marketer is so important. While custom packers have volume, they have little control over the growing process.
John - Know what your customer’s needs are and what they are doing with their onions. Some may need onions more suitable to food service and others to the retail market. Knowing when to switch from old crop to new crop is also key. Contracts should be setup a month before the start of planting. This will assure the most consistent and competitive pricing. Contracting without the outbound business there is a gamble, but if you have committed customers you should contract year round.
John - If you are in food service, processing, or other areas with consistent outbound pricing you should contract; anything with a structured retail price. Worst case scenario you should be at least 50% contracted. This will help hold you average and protect you in high and low markets.
Shay - I agree with John on all points except one. History has shown that the average “spot market” prices are $1-1.50 higher than the average contract price. So if you are going to error, error on the side of a contract. On average you will come out a winner. Also take into consideration that if a contract is higher than the “spot market” you are usually talking about $.50 to $1.50. On the other hand, if the “spot market” is higher than the contract you may be talking as much as $10-$15! See the graph below for a clear picture of the savings.
Shay - As a Grower/Shipper, of course I think you should contract directly with the grower. Working directly with the grower you can get your onions grown the way you need them, especially if you go to them early. If you contract with a “custom packer” you won’t have the same type of control. They will bring onions in from many different growers, almost all of whom are looking at maximizing their yields, which may have an impact on your quality and length of shelf life.
John - Contract with the person you are the most comfortable with. You may wish to contract with a larger company because they will have more shippers to turn to cover a contract. It may also be smart to split up your contracts. You could do one with a marketer (broker) and one directly with a shipper.
John - Onions are used in large volume across the country. Onions have a tendency to go up and stay up, unlike leafy items that go up in price, but quickly come back down. A contract will give you a steady control over the price of your onions so you don’t lose money in a time of high fluctuation.
Shay -Onions are not like other commodities, they are sold on a world market. Weather, draught, and disease in places thousands of miles from the USA can have dramatic impacts on the market here in the USA. On the other hand, commodities that can’t be shipped across entire oceans, and are destined to be sold domestically, tend to be less volatile over the long- term.
Some would argue that following a year with high prices, that it is a wise time not to contract as farmers like to “chase money”, but with onions that isn’t always a wise move. Like other commodities, the down swing on onions may be 20% when compared to the spot market, but the upswing can vary from many other commodities. Instead of seeing just 20-40% on the upswing of the market, as is generally the case with ag commodities, it is not uncommon to see increases of 200% or more when it comes to onions. In other words if you don’t have a contract, it doesn’t take long to wish that you did.
Supplies in the Northwest are down again with total daily shipments well below 200 loads.
That is just 70% of just 2 weeks ago. Supplies are very manageable, but higher prices and fear of the potential the downside has many buyers staying away from the phone. Instead many are buying short to avoid any potential risk. NW supplies will be available for another 2-3 weeks; after which Southern Texas and Imperial Valley California will enter the market. Prices may spike up again between now and then, but only if there is significant rainfall in either of the two areas just mentioned.
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Planting has just ended in the Northwest. This field E. Oregon will be ready for Harvest in Mid-August.
This is going to be an interesting report. I want to lay out all the factors that are coming in to play with the onion market.
First, supplies started out lower due to inclement weather in Idaho, Oregon, and Washington during the 2013 storage crop season. Yields were down somewhere between 15 and 20% (that is about 10,600 loads)
Second, shrink is up 10-15% (that is about 7,500 loads) due to storage problems attributed to the high amounts of rain that fell on the same NW crop.
Export demand to Asia and Latin-America has been higher than “normal”. NW onion exports are up 20% over last year (that is 1,357 loads).
Mexican exports into the USA that normally starts in mid-late January have been virtually non-existent. As of this writing Mexico has shipped 89% fewer loads when compared with last year (that is 1,176 loads).
As much as 80% (that is 1,800 loads) of Washington’s and Oregon’s over-winter crop has been destroyed due to harsh winter conditions. While these loads are not marketed until mid-late summer, they are primarily used to supply area processors. Not having this supply available will force processors, who also fresh pack, to reduce the number of onions they sell on the fresh market now.
Additional factors abound, but they are of a more speculative at this time. If we use the “hard numbers” above we could be short over 22,000 loads. Although this may seem too high, for argument sake we can cut the number in half to 11,000 loads and still see the ramifications. This number represents nearly 2 months of consumption of the entire USA!
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