Global trade in onions took on a bitter taste in the COVID-19 years

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The COVID-19 phase showed up the many challenges food exporters and importers had to go through. Some of those issues are still unresolved. Image Credit: ANI

Food security is a geopolitical matter – and thanks to COVID-19, so is the exporting and selling of onions to other countries.

Allegedly, onions were such a heated topic during the pandemic that it became vital to know what country was producing beyond its domestic needs and capable of shipping excess onions to others. This sounds straightforward, even though the case of how to source onions in a global market vying for limited produce, is not.

Interestingly enough, and as countries that do not produce onions were scrambling to import, countries like Bangladesh, which was the world’s largest onions importer in 2020, decided to eventually impose tariffs on onions. Why?

Here is what happened.

When the pandemic limited production capacity in food producing countries, due to waves of COVID-19 and a subsequent spike in cases as well as due to the disruption in supply chains; countries were generally keener on keeping their own produce within their borders. Doing so yielded two benefits.

One, not having to worry about importing the food commodity in question during uncertain times if domestic production failed to meet expectations. Two, balancing domestic demand with domestic supply, which would keep a downward pressure on domestic food prices.

The case of onions followed the same logic, except that onions go into so many dishes that it is not easy to picture a world without onions — almost seriously.

What happened next with onions was akin to what happened with other food commodities in 2008, such as rice and wheat. The price shot up in the midst of the pandemic and it proved to be extremely difficult to source it from anywhere. Added to that was the fact that – according to 2020 data from the United Nations Food and Agriculture Organisation (FAO) – the top producers of onions are not necessarily its top exporters.

Protect production

To illustrate, India is the world’s largest producer of onions, but is only its second largest exporter. Notably, India has a domestic onion production programme that protects its farmers from fluctuations in international prices, allowing it to sustain a surplus quantity of onions. For the surplus not to cause domestic onion prices to crash, surplus quantities must be exported to onion importing countries, including the world’s largest onion importer.

Notwithstanding the above, it was fairly challenging during the COVID-19 disruption to source onions from traditional import partners. What this meant is that it became customary to try and source onions, along with other food commodities, from wherever they can be found. What makes onions special here is that unlike rice and wheat for instance, it cannot be categorised among food essentials or necessities.

Netherlands’ gain

Yet, onions were hard to source especially when the two largest producers, India and China, are also the two most populous countries. In fact, this could partly explain why the Netherlands ranked as the world’s top onion exporter in 2020 despite being 13th when it comes to its production, while India and China came in second and third, respectively.

In other words, having a large population makes it increasingly difficult with time to export food — India’s onion production programme being the exception here rather than the norm.

As for Bangladesh, being dependent on what would naturally be cheaper imports of onions compared to locally produced ones, a surge in imports could undermine local production and put onion farmers out of business. In the short-term, and when dealing with a pandemic-related shortage, that is fine and well.

Resort to tariffs

In the long-term, over-reliance on onion imports could grow and end up completely dismantling the onion cultivation infrastructure in the said countries. Tariffs, therefore, are used to stabilise prices of onions in the country, whether sourced domestically or sourced from abroad.

This is even more important when considering that populous food import sources, including those of onions, may not always be in a position to export different food commodities. To conclude, food trade has changed for good as a result of the COVID-19 disruption to supply chains.

Whether it is onions or any other key food commodity, the sourcing of such commodities has proven harder than initially anticipated. Countries, nonetheless, resorted to protectionist measures, including tariffs, despite their reliance on food imports to secure sourcing of key commodities in the long-term by safeguarding domestic production.

The last thought that I want to leave you with: which other countries resorted to protectionist measures during the pandemic?