Case: [With the New Season Approaching, Demand for Australia Onions is Increasing

https://www.tridge.com/stories/with-the-new-season-approaching-demand-foraustralia-onions-is-increasing Bojan Mijatovic Alan Chau Updated Nov 27, 2022 Due to the global shortage of onions driven by EU consumption, demand for Australian onions is increasing in the preseason. Queensland had a light crop due to lower plantings and increased input costs, while South Australia and Tasmania had favorable weather, and production is expected to achieve last year's results. A freetrade agreement signed in April with India, lowering import tariff on onions by 30%, should also boost the trade of fresh onions from Australia. Indicative prices for fresh onions are USD 1.01/kg - 1.21/kg FOB, according to Alan B Chau, Tridge Engagement Manager in Australia. Preseason demand for Australian onions is increasing, according to Alan B Chau, Tridge Engagement Manager in Australia. Many growers are over-committed with existing preorders. At the same time, Queensland had lower production due to diminished plantings and increased input costs, fueling domestic demand. The majority of production is based in South Australia (48%) and Tasmania (22%), with lower seasonal volumes from Queensland (12%) and local market supply in Western Australia (10%).

Earlier this season, Eastern Australia's vegetable-growing regions were seriously damaged by localized flooding and extremely wet weather, which swept away topsoil and planted crops. The unfavorable weather conditions also caused disruptions in vegetable planting schedules, creating production and harvesting gaps that affected the availability of vegetable crops for domestic and international markets. Queensland, especially the Southeastern part, was hit with wet weather just after planting, with floodings, which caused setbacks in production. However, expectations are that for 2022, total production in Australia will be at similar levels to previous years, around 280,000 MT. The primary type of onion grown in Australia is the traditional brown onion, which accounts for 79% of a fresh production. Onion production takes place during late spring, summer, and autumn. Planting starts around April through to September, harvesting from August to March, and storage supplies the market for the winter months

Due to the current world shortage of onions driven by the EU, there is a limited supply on the global market, which contributed to the great attention of traders in the Australian onion market. The leading trading destination for fresh onions from Australia in 2021 was Thailand, with 23.8% of the market share and a total value of USD 6M. Thailand is also the market with the highest 5-year growth, almost 600%, since 2017. Not just in terms of value, the export quantity of onion production in Australia is increasing. From 27,535 MT exported in 2017 to 54,019 MT in 2021, marking a 196.18% leap. Based on Alan B Chau's local insights, prices will start higher this season. Farmers and traders face the challenge of securing the volume required for retail, while the wholesale price needs more room for increase. Indicative prices for fresh onion from Australia levitate around USD 1.01/kg - 1.21/kg FOB. Another factor for boosting trade is the signing of a trade agreement with India in April (AI-ECTA), eliminating tariffs on onions which are currently 30% to 0% in seven years, phasing to the elimination of tariffs

Question are:

1. Identification and description of the issue/s from the case study.

2. Graphical illustrations and explanation of how the economic theory or concept is exhibited in the case.

3. Theoretical framework/economic principles to be applied in deriving solutions. The expectation is that you would also use graphs (such as demand-supply equilibrium, cost curves, PPF, etc.) to articulate your responses.