News and knowhow for farmers

Why it is more profitable to sell onions immediately after harvest than store

CSIRO ScienceImage 2782 Brown Onions

By George Munene

According to players in the onion agri sub-sector, it is more profitable for small-scale farmers to harvest and sell their onions even if the market prices are unfavorable rather than store them for better prices in the future.

Onions are perhaps the only widely consumed horticultural product that is relatively easy to store. Intuitively, it seems financially sound for farmers to hoard them for a better future price. 

This however negates the fact that better future prices are not guaranteed; up to 20 per cent of weight can be lost from stored onions; storage facilities can be expensive and need to be secured; as well as the opportunity cost incurred.

Joshua Mamwaka, an onion trader in Nairobi’s Wakulima Market charts the prices of agro-commodities and has seen a similar pattern play out throughout the year:

Farmers will store their onions and look to time the market and sell when prices are at their highest. Most of these farmers are however often victims of parallel thinking; they all flood the market with onions at the same time when prices are high, and a select few get to enjoy these inflated prices before the market is flooded and prices dip lower than they ever were before.

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“Farmers need to invest in monitoring markets at the front end, not the back end when their crops are already harvested. 

Get to learn what the average prices have been over particular months which will inform when to plant. You should also look to build your knowledge of market dynamics, which are forever changing. Do not just focus on crop production,” he informed

There are months when supplies to Kenyan markets are so low, brokers will buy anything. In other months they will only accept well-dried onions owing to markets being well-stocked. Tanzanian onions also flood the Kenyan market periodically, which is not a time you want to be heading to market. All this should be information a farmer is well acquainted with before even breaking ground.

Lucy Wangari, popularly known in farming circles as the Onion Doctor, advises small-holder farmers to sell their onions given they can cover their cost of production and earn a profit then go again.  

“Onions are a vegetable; they are meant to be harvested for consumption, not for storage,” she advises.

There is also the opportunity cost most farmers do not account for while storing onions in the pursuit of better prices: 

“If I can meet my overheads and make a small profit, I’d much rather harvest and sell my onions at their peak weight for Sh30 a kilogram, grow and earn from something else, than have them stored for months in the hope of doubling my profits,” said Joshua.

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Your financial liquidity, i.e, the ability to raise cash when it is needed is also hampered. When you have sold off your onions, you can meet some of your short-term financial obligations and reinvest in the coming planting season. This avoids having to borrow money which often comes with attached interest rates.    

Wall Street investor Warren Buffet is credited with an old-school saying: “Be fearful when others are greedy and greedy when others are fearful.” According to Joshua, this can be applied in reading local food markets as going against the grain often leads to gains for well-informed investors.

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