Spend Matters welcomes a guest post from Jo Allen of Mintec.
Flavourings are expensive by weight. They tend to be the most expensive ingredient of many food products. Onion powder is just one of those costly ingredients. Major potato chips brands like Pringles and Lay’s rely on onion powder to create some of our favourite flavours like sour cream and onion, cheese and onion, and onion rings.
Although the dehydrated onions equate to only 2 percent of the size of the onion market in volume. They are worth up to six times the value of the fresh onion market. Global onion powder prices have been increasing year-on-year since 2012 – all in all a 20-percent price increase.
The US is the major producer of onion powder, producing over 100,000 tons annually, which accounts for around 50 percent of total global production. This is followed by India, who produces around 40,000 to 50,000 tons annually. China and Egypt each produces around 13,000 to 15,000 tons.
Last year global onion production fell in all major dehydrated onion producing countries due to drought conditions. The reduced output drove prices up in early 2013 but they were also influenced by increased input costs driven by a need for further irrigation. In the US, warm weather in March and April of 2013 led to reduced yields. So by season’s end, the US onion industry had processed 9 percent less than was estimated. This tightened supply was on top of the already low carry-over stocks left from 2012.
This year, the drought has continued causing concerns that the 2014 crop will be lower than estimated for the second year running. California, a major dehydrated onion growing state, officially declared drought conditions in mid-January. Unfortunately, the US is not the only country to be suffering with increased prices due to restricted supply. In India the new crop is expected to fall short of forecasts by 20 percent, and Egypt’s ongoing political turmoil is causing uncertainty of supply to the global market. Since current (and future) supplies of dehydrated onion product around the world are tight, there's little doubt that onion prices are going to leave us with a not-so-sweet taste in the near future.