Case Study Sample on Onion Producing Industry

Date:  2021-09-02 18:41:53
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India 15118.00

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Pakistan 1701.10

Myanmar 1137.90

Brazil 1556.00

Russian 1536.30

Turkey 1900.00

Indonesia 1048.23

Other Countries 30244.54

Table 1 Table showing the major onion producing countries

Following the central position that onions take in both homes and food businesses, it is little wonder then to hear of price hikes now and then. A myriad of issues may be floated as spurring these fluctuations. Equally valid, a host of other problems may still lay bare before us unexplored. Significant aspects that have done enough rounds among analysts include the following;Government actions and inaction

Faulty economic policies

Hoarding practices by the traders taking advantage of the demand-supply mismatch

Proponents attributing the soaring onion prices to government actions argue that governments efforts to push onion exports, it in a way disregarded the domestic onion demand. The strategy came about in a bid to take advantage of the World Trade Organization removal of quantitative export restriction. Conveniently, the approach shed light on the government policies regarding the local trade, which is as follows:

Government does not provide onion farmers with support prices

The government of India regulates onion export by fixing the minimum export price.SGovernment can ban the export and import of onions (ET Bureau, 2011)

State-level legislation restricts interstate trade in agricultural products for purposes of food security

This report focuses on resolving the current onion market prices problems in the short term and also to inspire a production and economic policy change that can help in mitigating or averting the recurrence of similar situations in the later on altogether. The paper focuses on the practices that even out the supply and demand mismatches through mechanization and the use of modern agricultural technologies

2.0 The Onion Economics; Demand, Supply and the Market

2.1 Demand Demand for food among a growing Indian population calls an insatiable desire for onions. Plentiful and inexpensive, every household can afford onions. The fact that there is almost no availability of substitutes, a slight change in the price of onion bare affects the quantity demanded. The graph below illustrates the possibilities of onion demand expanding or contracting depending on the onion prices (Stiglitz and Walsh, 2006).

Figure 1 Onions Demand Curve

2.2 Supply

Figure 2 Onion Supply Curve

The above supply curve is a representation of the motivation behind the onion farmers steadily rising productions. The seasonal fluctuation in prices makes it possible traders to hold the produce and supply the market when the rates are favorable to them. The overall effect is the motivate to farmers to produce when the prices are high, and provide less when the rates are lower (Sonu, 2002).

Like in every other onion producing country, the business environment for onion producers consists of an insatiable combination of households, hotels, and restaurants both local and international. India has experienced an ever-growing appetite for more onions by citizens irrespective of the scarcity of resources (workforce, raw materials, machinery, and technology) necessary to produce more onions and their varieties. India, the three types of onion red, yellow, and white, consumed worldwide. Seventy percent of the production comes from Maharashtra, Karnataka, Gujarat, Bihar, and Madhya Pradesh onion producing states. The output is between 24.25 MT/ha to as low as 10.77 MT/ha. Additionally output has increased among all the States (Rankin, 2004).

Table 2 Production from Indias top five onion-producing states

Figure 3 Map of top ten Onion producing states in India

Source: www.mapsofindia.com, 2017

For an extended period, Indian farmers did not have access to adequate information regarding the post-harvest technology of onions. However, a collaboration of agencies worked to provide recommendations to onion growers. Impact from the post-harvest technology when combined with the pre-harvest factors to determining shelf-life. Therefore, to control their supply, farmers and traders found it essential to have an integrated approach.

2.3 The market

It is vital at this point to assess whether the onion market in India operates purely base on the price fluctuations due to natural happenings of demand and supply. Significant at this point is the assessment the impact government protective policies have on the market. Postulates put forward have suggested a flawed approach to the onion issues from the government. The market is the ultimate platform for the suppliers and the consumers to reconcile their mutual interests. On this platform, the price is the vital element. How and what controls it makes all the difference to the market. The government of India possibly constrains the economic activities of the nation through:

Taxation, subsidies, exemptions

Controlling exports

Augmenting supply through imports

Supplying onions below the market prices

The government should be seen promoting the infrastructure to allow markets to thrive. The supply side of the onion market, through increased productivity, likely shows the farmers responsiveness to the market prices. A mixed economy has proven incapable of offering solutions without resulting in extreme measures.

3.0 Conclusions and Recommendations

Indian farmers enjoy three seasons to bring their crop to the market. Still, they grapple with issues such as efficient allocation of production resources, and the eventual post-harvest handling of their produce. Moreover, having a means to ensure that the crop is available throughout the year could bridge the gap traders exploit to facilitate their hoarding of the harvest in bits to create artificial demand. Technology adoption in the farming practices and the post-harvest handling and the and liberalizing the market could allow for free import and export from and to other countries could help stabilize the Indian volatile markets prices.

3.1 Extensive Application of Technology

Mechanization of agriculture has proven to increase productivity per hectare multiple folds. Although capital intensive on the onset, its rewards are seen in the future productivity. Mechanization is a worthy substitute for the labor-intensive methods employed by farm hands to extend to facilitate crop husbandry practices (Gajendra Singh and William Chancellor, 1974). These old methods make it impossible in some way to control adequately the crop diseases due to inefficient application of chemicals. Additionally, the labor-intensive methods also account for the post-harvest losses that may contribute to supply shock. Extensive championing and subsidizing towards mechanization of agriculture, more so onion farming, should result in better productivity. This enhanced productivity, however, creates another problem.

Increased produce could mean the need to store the produce for longer for longer. This realization then calls for the rallying for improved storage facilities. While they may appear obvious, their recent development and communication to farmers may have efficient reached all the smallholder farmers probably still using the traditional means to preserve their crop before getting to the market. Solving storage problems may involve value addition (Ardeshna et al., 2014). For instance, onions can be processed into powders adding to their shelf-life. Value addition would take care of any losses that occur during storage in various facilities.

The answer that addresses much of the concerns from analysts and the Indian political opposition would be to find ways to incorporate technologies in the onion production process. Through science, it would be possible to overcome natural factors that adversely affected crops, for instance, in Maharashtra. Fungal diseases, erratic and extended monsoons that hamper crop the full exploitation of husbandry practices can all be overcome through technology.

3.2 Relax Government Intervention

The government should also relax its interventions in the markets to enable more of the the natural forces of supply and demand to control the prices. Production being quiet stabilized throughout the year, there will be no need for traders hoarding goods. Moreover, value addition will have introduced an substitute good to the bulb.

Reference

Agriexchange.apeda.gov.in (n.d.). Agriculture Market News Information from APEDA AgriExchange. [online] Agriexchange.apeda.gov.in. Available at: http://agriexchange.apeda.gov.in/News/newshome.aspx?categorycode=0201 [Accessed 18 Feb. 2018].

Ardeshna, N., Vekariya, S., Shiyani, R. and Gondaliya, V. (2014). Economic Assessment of Onion Dehydration in Gujarat State: Can It be a Means for Stabilizing O...

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