Good market greets the 2007 Texas onion deal
Good market greets the 2007 Texas onion deal
As Texas growers and shippers welcome the start of the onion season this year, they begin with a market that has demand exceeding supplies. In fact, as March began, 40-pound cartons of onions from Mexico saw an f.o.b. price above $30 - a number seen only once or twice over the last 35 years.
The Texas onion deal typically begins in March, but for most Texas onion shippers the season starts earlier when they start bringing in onions from Mexico. Most south Texas shippers try to have a seamless transition from Mexico to Texas, which allows them to be in the onion deal for almost half the year.
If the Mexico deal is in the doldrums when Texas supplies start, that usually means the price for Texas onions will also be weak. But the reverse is true this year, and Texas shippers say the market should remain in a demand- exceeds-supply situation for the foreseeable future.
John McClung, president of the Texas Produce Association, said that it seemingly hasn't been a good growing season for onions anywhere. "Mexico is down. Texas is down. The U.S. is down," he said of supplies.
For both Mexico and Texas, it appears to be the case of the double whammy: poor weather during the planting season limited the number of acres that were able to be planted, and unkind growing conditions for much of the past six months have resulted in less than stellar yields from Mexico. Of course, the jury is still out on which type of yields Texas will get, but there is no doubt that acreage is down - way down.
"I'm looking at the [acreage] report right now," Mr. McClung said in late February. "Last year (2005-06 season), we [Texas] had 17,695 acres in our two districts. This year, there are only 12,512 acres planted."
One doesn't have to be a mathematician to see that this is a substantial drop. In mathematical terms, it represents a decline in acreage of just about 30 percent. In the fruit and vegetable industry where a 10 percent change in production volume can represent a much larger percentage price swing, this differential is huge.
The root of the problem can be traced back to October. The famed, and trademarked, Texas 1015 onion got it moniker because the best planting date was said to be Oct. 15, or 10-15 for the numerologists. While improvements in seed varieties over the years means that the original 1015 onion is no longer grown, that target planting date is still valid.
Mr. McClung noted that Texas has a relatively short marketing window in which to move its famous onions. Onions are grown in many, many states in the nation as well as in Mexico. And sweet onions from Maui, Vidalia, the Imperial Valley in California and Walla Walla, WA, to name just a few competitors, all conspire to keep that marketing window narrow.
"If we can't get in to plant by the end of October, our marketing window is pretty much gone," Mr. McClung said.
Don Ed Holmes of The Onion House in Weslaco, TX, conceded that bad weather during the planting season was a factor that limited acreage, but he believes that economics played even a bigger role. "Last year we were selling for $3.50 to $3.75 a sack for much of the season," he said. "Production costs are at least $4.50. Growers were losing money -- lots of money on every sale."
When the 2006 crop was being planted in fall 2005, Mr. Holmes said that many growers didn't have any other options. He remembered that low prices for corn, wheat and cotton meant that those were losers from the start.
"Growers knew that at least sometimes they could make money on onions, so there was a lot of onion acreage. This [planting] year was different. Corn and wheat prices were pretty good, and that usually means cotton's pretty good too."
Mr. Holmes said that growers had options, and he suspects that many of them went with the field crops which are cheaper to grower than with the more risky and expensive fresh-market onions.
Hal Hoffman of the San Antonio Commission Co. of Texas in McAllen said that the growing season has also been very cold and not conducive to producing a quick crop.
Combine the late planting with a growing season that is taking a bit longer to finish the crop, and the industry has the makings of a late season.
While mid-March usually sees a fair amount of Texas onions in the market, Mr. Hoffman said that "we're not going to see anything until about March 20 or maybe even the week of March 26."
Though he said Feb. 28 that the temperatures had risen to 96 degrees that day, he also said that February 2007 was not a typical February in south Texas. "We had very few days with much sunshine. It has only been these last few days that we have had good growing weather."
While the lack of warm days has not helped the crop mature, Mr. Hoffman said that the weather has not hurt the quality of the crop. "The tops look really good," he said, "and good tops usually mean a good onion."
He added that there have been no reports of disease problems or other adverse conditions that would hurt the eventual packout.
What that all adds up to is a later-than-usual Texas crop that should also be lighter than usual but with good quality. Prices should be up significantly, and it may well be a season were the final ledger is written in the black ink.
(For more on the Texas onion deal, see the March 12 issue of The Produce News.)
The Texas onion deal typically begins in March, but for most Texas onion shippers the season starts earlier when they start bringing in onions from Mexico. Most south Texas shippers try to have a seamless transition from Mexico to Texas, which allows them to be in the onion deal for almost half the year.
If the Mexico deal is in the doldrums when Texas supplies start, that usually means the price for Texas onions will also be weak. But the reverse is true this year, and Texas shippers say the market should remain in a demand- exceeds-supply situation for the foreseeable future.
John McClung, president of the Texas Produce Association, said that it seemingly hasn't been a good growing season for onions anywhere. "Mexico is down. Texas is down. The U.S. is down," he said of supplies.
For both Mexico and Texas, it appears to be the case of the double whammy: poor weather during the planting season limited the number of acres that were able to be planted, and unkind growing conditions for much of the past six months have resulted in less than stellar yields from Mexico. Of course, the jury is still out on which type of yields Texas will get, but there is no doubt that acreage is down - way down.
"I'm looking at the [acreage] report right now," Mr. McClung said in late February. "Last year (2005-06 season), we [Texas] had 17,695 acres in our two districts. This year, there are only 12,512 acres planted."
One doesn't have to be a mathematician to see that this is a substantial drop. In mathematical terms, it represents a decline in acreage of just about 30 percent. In the fruit and vegetable industry where a 10 percent change in production volume can represent a much larger percentage price swing, this differential is huge.
The root of the problem can be traced back to October. The famed, and trademarked, Texas 1015 onion got it moniker because the best planting date was said to be Oct. 15, or 10-15 for the numerologists. While improvements in seed varieties over the years means that the original 1015 onion is no longer grown, that target planting date is still valid.
Mr. McClung noted that Texas has a relatively short marketing window in which to move its famous onions. Onions are grown in many, many states in the nation as well as in Mexico. And sweet onions from Maui, Vidalia, the Imperial Valley in California and Walla Walla, WA, to name just a few competitors, all conspire to keep that marketing window narrow.
"If we can't get in to plant by the end of October, our marketing window is pretty much gone," Mr. McClung said.
Don Ed Holmes of The Onion House in Weslaco, TX, conceded that bad weather during the planting season was a factor that limited acreage, but he believes that economics played even a bigger role. "Last year we were selling for $3.50 to $3.75 a sack for much of the season," he said. "Production costs are at least $4.50. Growers were losing money -- lots of money on every sale."
When the 2006 crop was being planted in fall 2005, Mr. Holmes said that many growers didn't have any other options. He remembered that low prices for corn, wheat and cotton meant that those were losers from the start.
"Growers knew that at least sometimes they could make money on onions, so there was a lot of onion acreage. This [planting] year was different. Corn and wheat prices were pretty good, and that usually means cotton's pretty good too."
Mr. Holmes said that growers had options, and he suspects that many of them went with the field crops which are cheaper to grower than with the more risky and expensive fresh-market onions.
Hal Hoffman of the San Antonio Commission Co. of Texas in McAllen said that the growing season has also been very cold and not conducive to producing a quick crop.
Combine the late planting with a growing season that is taking a bit longer to finish the crop, and the industry has the makings of a late season.
While mid-March usually sees a fair amount of Texas onions in the market, Mr. Hoffman said that "we're not going to see anything until about March 20 or maybe even the week of March 26."
Though he said Feb. 28 that the temperatures had risen to 96 degrees that day, he also said that February 2007 was not a typical February in south Texas. "We had very few days with much sunshine. It has only been these last few days that we have had good growing weather."
While the lack of warm days has not helped the crop mature, Mr. Hoffman said that the weather has not hurt the quality of the crop. "The tops look really good," he said, "and good tops usually mean a good onion."
He added that there have been no reports of disease problems or other adverse conditions that would hurt the eventual packout.
What that all adds up to is a later-than-usual Texas crop that should also be lighter than usual but with good quality. Prices should be up significantly, and it may well be a season were the final ledger is written in the black ink.
(For more on the Texas onion deal, see the March 12 issue of The Produce News.)
