Texas onion deal sees unprecedented market conditions
Texas onion grower-shippers opened their season with unprecedented market conditions that included a near-shutdown of foodservice outlets and booming demand from retailers.
The combination of factors — caused by social distance restrictions imposed because of the COVID-19 pandemic — resulted in up and down market conditions in late March, with the market for jumbo yellow grano onions at $12 per 40-pound carton on March 19, moving to $16 per carton on March 23 then falling back to $12 per carton on March 27. Grano yellow onions marked sweet opened at $14 per carton on March 20 and increased to $20 per carton the week of March 23.
The onion market exploded to a great start out of the gate, driven higher by retail demand, said Will Steele, president and CEO for Frontera Produce Ltd., Edinburg, Texas.
By March 27, demand dropped off to near-standstill levels. But demand will change again, he said, as the retail purchases find their balance.
“I think it’s just an industry-wide situation right now, the spikes we’re going to have to live through and live with,” he said. “The entire industry is going through this stress and I fear for the outcome, I fear for some of the small operators in the foodservice world.”
The onion crop is about two weeks early this year, considerably ahead of last year’s pace. Later-maturing varieties of Texas onions were expected to have a 60/40 split of medium versus jumbo sizes, Steele said.
Volume
From a volume perspective, the season got off to a quick start compared with a year ago. For the week of March 15-21, Texas onion shipments totaled 15.4 million pounds (385,000 40-pound cartons), up more than fivefold from just 2.8 million pounds (70,000 cartons) the same week last year.
Last season, the USDA reported that total onion shipments from Texas were 246 million pounds, or about 6.15 million 40-pound cartons.
Earlier, Texas grower-shippers told The Packer that acreage for 2020 was down compared to a year ago.
Acreage this year is about 6,000, compared to about 7,000 in recent years, according to Dante Galeazzi, manager of the South Texas Onion Committee.
Warmer growing conditions spurred the crop and brought on harvest by mid-March.
The COVID-19 outbreak has created erratic demand to start the season, said Don Ed Holmes, owner of The Onion House LLC in Weslaco, Texas. “There is no normal anymore, really no roadmap (for the season),” Holmes said.
With onion supplies drying up from the Northwest and Mexico’s volume also sliding, Texas will be poised to play a big role in the spring.
When the season started, Holmes said panic buying by consumers caused demand from retailers to spike.
After a period of intense shipments, retailers by late March were taking a breath and finding plenty of onions in their supply chain. Demand from retailers paused but Holmes said he anticipates the onion market to be more volatile this year because of the COVID-19 pandemic. The highs will be higher and the lows will be lower.
“Hopefully, we’ll get to more of a flat line as far as supply and demand around the corner, as we move into life after the coronavirus,” he said.
Whereas assumptions could be made in the past about total U.S. onion shipment levels and market conditions, such assumptions may not hold this year, he said.
“Where we are right now is we don’t really know what that new (shipment) number is going to be because of foodservice,” Holmes said. “The foodservice industry was just totally decimated. We are just feeling our way through the dark here.”
When restaurants do reopen, Jimmy Garza, vice president of Bebo Distributing Co. Inc., Pharr, Texas, said in late March that the increase in business will be strong.
“Everyone is just trying to do the best they can with the current scenario, but there’s no doubt about coolers full of products right now at the wholesale level,” he said. “When this thing turns back around, (buyers) will start filling that pipeline with a huge surge of demand,” Garza said.
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