A steep fall in onion prices is around the corner

India’s rampant onion prices may finally be running out of steam, with fresh supplies of the pungent vegetable set to hit the market next month.

Prices at one of India’s biggest wholesale markets may plunge to about ₹20-25 per kilogram from mid-January, according to Jaydatta Sitaram Holkar, a director at Agricultural Produce Market Committee, a state-run wholesale market for farm commodities at Lasalgaon in Maharashtra. That’s more than 80 per cent below Tuesday’s record price.

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A new onion crop should help ease what has been a catastrophic year for the vegetable in the worlds second-most populous nation. Soaring prices have been blamed for accelerating food inflation and even triggering onion thefts and fistfights, according to some reports.

The key ingredient for Indian curries and chutneys is so ubiquitous that economists are keeping a close eye on prices for signs of when the central bank may cut rates.

The country usually produces more onions than it needs. But this year, torrential rains and flooding damaged stockpiles as well as the monsoon crop in the main growing areas, according to Siraj Hussain, a visiting senior fellow at the Indian Council for Research on International Economic Relations in New Delhi.

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The government sought to control prices by banning exports, restricting hoarding and increasing imports. Yet, the rally continued with shipments from overseas not due to arrive until Dec. 27.

Prices surged to a record ₹111 per kilogram on December 17, according to Narendra Savaliram Wadhavane, a secretary at the state-run wholesale market. Average wholesale prices are still about 80 rupees per kilogram, compared with about 15 rupees in June and July.

Hussain, who is also a former agriculture secretary, warned that the government’s decision to limit onion stockpiles could hurt farmers when prices come down again as they’ll be forced to sell despite poor profit margins. Prices are historically volatile, sinking to as low as 0.5 to one rupee per kilogram toward the end of 2018.