In turn, the shortage in supply, consistent with the law of supply and demand, bids up the price of onion to unprecedented levels. It should be noted that prices went up from 1.00 to 1.50 in a month's time.
The high price of onion might must that producers are benefited to compensate the low level of produce. However, this is not the case as middlemen are the ones primarily generating hefty profits by charging a high mark-up to consumers. Recognizing the huge profit opportunity in bidding up the price without affecting consumer demand, these middlemen are blamed for the sharp increase in prices. Farmers, on the other hand, struggle with still low income amidst the high value of their commodity.
The consumer foodservice industry is also adversely affected by the onion crisis. For the past years, it can be noted that more and more people are dining out which significantly bolstered the sales trend of these industry players. With the rise in the price of onion, restaurants are expected to incur higher costs of input squeezing their mark-up if they do not opt to adjust the price of their product offerings.
The onion crisis is beneficial its substitute goods. As the supply dwindles, consumer looks for alternative commodities which they can use instead of onion. It is expected that buyers will be turning to leek which is its closest substitute. ...