How Egypt became Europe's onion lifeline

Egypt annually produces over three million tons of onions, exporting a third. A drop in production and a surge in demand have caused prices to spike. Europe faced a shortage of onions in 2023 due to floods in New Zealand and export bans in several CIS countries. This led to a heightened demand for Egyptian onions, favored for their quality and adherence to European standards. Egyptian onion exports to the EU doubled in MY 2022/23, reaching a four-year high. Despite the overall high demand, Egyptian onion production volumes have dropped this season. Prices for onions have surged, leading the Egyptian government to consider an export ban to stabilize local market prices. However, the ban's initiation was postponed to 1 October to respect prior export commitments.

Onion Production in Egypt

Egypt produces more than three million tons of onions each year, exporting a third of it. Egyptians have an average consumption of 15 kilograms of onions annually. Onions are cultivated on over 195,000 feddans. The onion crop is one of the important export crops in Egyptian trade. The drop in production, versus an exceptionally high demand, has led to a rise in Egyptian onion prices. 

Floods and export bans lead to shortages in Europe

At the beginning of 2023 onion stocks had been down in Europe in a time of disruption across the major origins of this crop. In New Zealand, floods have washed away onion fields, and many CIS countries, such as Uzbekistan, Kazakhstan, Tajikistan and Kyrgyzstan, had banned onion exports to maintain stable prices and sufficient quantities for their domestic markets.

Egypt jumped into the breach

Europe's decline in onion production, due to its climatic issues, has led to a surge in demand for Egyptian onions. Egypt, with its longstanding history of agricultural exports and ability to meet European standards, especially concerning pesticide reduction, is the preferred choice for European buyers, especially during onion shortages. Egyptian onion growers jumped into the breach and increased exports to Europe. This is also due to Egypt's geographical proximity and high onion production. Egypt benefited from favorable weather conditions for producing onions in a range of sizes that importers desire. Anticipating higher demand, they expanded their acreage, boosting their monthly export capacity from 700 to 1000 tons. 

Onion exports to the EU have more than doubled

Egyptian onion exports to the EU more than doubled in MY 2022/23, hitting a 4-year high with 128,000 tonnes shipped between July 2022 and June 2023. In contrast, exports hadn't surpassed 60,000 tonnes annually in the three preceding marketing years. However, this is still less than the record 165,000 tonnes exported in MY 2018/19. The significant increase in demand from European importers resulted from an onion crop failure in the EU due to a summer drought. By spring 2023, with local EU stocks dwindling, Egypt boosted its supplies, and the devaluation of the Egyptian pound made its products more price-competitive globally. 

High demand for Egyptian onions drives up prices

The ongoing Egyptian onion season is characterized by rising demand and decreased volumes compared to the previous year, leading to an increase in onion prices. Many producers opted out of growing onions this season due to last year's high production costs and unsatisfactory selling prices, choosing to cultivate other in-demand crops like wheat. Consequently, the onion acreage and volumes are lower this year. However, demand has surged, especially from European countries like the Netherlands, Spain, Slovenia, and Romania, as well as from traditional markets such as Saudi Arabia and the UAE.

Competition from India

Egypt currently faces limited competition in the onion market, primarily from India, which dominates the East Asian markets. But when India sometimes restricts its exports, East Asian demand for Egyptian onions grows. In many markets, Egyptian onions are preferred over Indian ones due to their superior quality. Egypt produces a variety of onions, with the most popular being red and yellow table onions, which are distinguished by their quality, strong flavor, aroma, and firmness. The mismatch between reduced production and high demand has caused Egyptian onion prices to rise by 22% compared to last year, suggesting Egyptian producers might increase onion acreage in the coming season.

Less onions this season

In August the Egyptian onion season has started with reduced cultivated volumes this year. Despite the lower quantities, prices have not risen due to a concurrent slow demand from international buyers. However, demand is anticipated to rise as the season progresses. While demand has been slightly subdued, it has remained consistent, benefiting local growers. Despite the decreased onion quantities this season, the quality has improved, which pleases their clients. 

Government wants export ban

The Egyptian Cabinet wanted to impose a three-month ban on onion exports in October to control soaring local market prices. The cost of onions has risen sharply, reaching EGP 35 per kilogram, compared to EGP 27 the previous month and EGP 12 a year earlier. This surge in onion prices played a role in driving the annual headline urban consumer inflation rate to 37.4% in August, a rise from 36.5% the month before, as stated by the Central Agency for Public Mobilization and Statistics (CAPMAS). In August, vegetable prices, in general, saw an increase of 24.4%, a significant jump from 5.5% the preceding month. Egyptians have an average consumption of 15 kilograms of onions annually. Alaa Khalil, from the Ministry of Agriculture, noted that Egypt produces more than three million tons of onions each year, exporting a third of it. The recent price hike is attributed to intermediaries and traders stockpiling onions.

Export ban postponed

The Egyptian Ministry of Trade and Industry has postponed the initiation of the onion export ban to 1 October, a decision made to respect pre-existing export agreements. This change follows a statement by the Egyptian Customs Authority suggesting a temporary suspension of the ban. Onions are a staple in Egyptian meals and have historically been one of the country's most economical vegetables.

Positive impacts of an export ban

The recent ban on onion exports in Egypt is expected to have both positive and negative impacts on the country's economy. Here are some potential positive impacts:

The ban is expected to help stabilize onion prices in the local market, which have been rising rapidly in recent months

The ban could encourage local farmers to increase their onion production to meet the local demand, which could create more jobs and boost the local economy

Negative impacts

The ban could negatively affect the income of onion exporters, who will lose out on potential profits from exporting onions.

The ban could also negatively affect the country's overall export revenue, as onions are one of the important export crops in Egyptian trade.

The ban could lead to a surplus of onions in the local market, which could lead to a drop in onion prices and negatively affect the income of local farmers.

In summary, the ban on onion exports in Egypt is expected to have both positive and negative impacts on the country's economy. While it could help stabilize onion prices in the local market, it could also negatively affect the income of onion exporters and the country's overall export revenue.