An onion’s journey through Maharashtra reveals how weak bargaining power, poor storage, and an uneven supply chain leave farmers underpaid and consumers overcharged.

By the time an onion travels from a farm in Nashik to a kitchen in Mumbai, its price may have changed more dramatically than the onion itself. In theory, prices should coordinate the interests of producers and consumers. Here, they often appear to do the opposite. In February 2023, average wholesale onion prices at Lasalgaon fell to approximately $6.05–$6.65 per quintal. For many farmers, that barely covered the costs of cultivation and transport. Yet after leaving Nashik, the same onion became considerably more expensive as it moved through wholesale markets, distributors, and retailers. How can an onion be too cheap for the farmer who grows it yet too expensive for the consumer who buys it?

The answer lies in a convergence of forces. Crops arrive in seasonal waves and remain vulnerable to the weather, but households need them every day. Perishable produce cannot wait indefinitely for a buyer, especially when adequate storage and efficient transport are not readily available. That urgency weakens farmers’ bargaining power, while traders with greater access to information, capital, and infrastructure can afford to wait. Government intervention adds another layer.

Procurement, buffer stocks, and trade restrictions intended to contain food inflation and protect consumers can alter the available supply. The final price, then, is not simply a reflection of a crop’s quality. It also incorporates the costs of time, distance, and risk—as well as unequal power.

The first source of volatility lies in the unusual elasticity of agricultural markets. Farmers cannot accelerate a growing season in response to today’s prices, while consumers cannot immediately remove staple foods from their diets. Because both supply and demand are relatively price-inelastic in the short term, even a small shortage can produce a large price increase. In May 2025, unseasonal rainfall disrupted Maharashtra’s farms and transport routes, causing wholesale tomato prices at the Vashi APMC to rise from $0.11–$0.14 to $0.34–$0.40 per kilogram. Retail prices reached $0.46–$0.57 in parts of Mumbai.

Yet high prices can sow the seeds of the next crash. Farmers respond by planting more tomatoes, but cultivation takes time. Their harvests may therefore reach the market together, turning scarcity into surplus. Prices then collapse, discouraging production during the following season and restarting the cycle. Economists call this the cobweb effect: production chases yesterday’s prices. Maharashtra experienced it in 2023, when soaring prices encouraged greater cultivation before a bumper harvest drove prices as low as $0.04–$0.06 per kilogram.

Once a large harvest arrives, farmers confront another problem: prices may eventually recover, but their produce cannot afford to wait. Each additional day erodes its quality and, with it, the farmer’s ability to reject a poor offer. A farmer may have to accept a low price rather than risk receiving nothing later. Perishability thus becomes a source of market power for buyers and a driver of distress sales. Research involving farmers in western Maharashtra found that 78.88 percent identified low and fluctuating prices as a major marketing constraint.

Between the farm and the kitchen lies an extended supply chain. A farmer may first sell to a village trader who aggregates the harvests of several farms. The produce then enters an Agricultural Produce Market Committee, or APMC, market for auction to wholesalers. Once purchased in bulk, it is transported and divided into smaller quantities for retailers. Maharashtra’s APMCs alone recorded 197.5 lakh metric tonnes of produce worth approximately $7.4 billion in 2021–22. Each link can add genuine value through aggregation, sorting, transport, or risk-bearing. The economic question is whether those services are provided competitively and at an efficient cost.

Only a fraction of the price paid at the counter reaches the person who produced the crop. According to Reserve Bank of India research, producers receive 33 percent of the consumer price for tomatoes, 36 percent for onions, and 37 percent for potatoes. The remainder is divided among wholesalers, transporters, and retailers, covering transport, labour, sorting, and the risk of spoilage. Still, the farmer’s modest share raises an important question: Which parts of this gap reflect unavoidable costs, and which arise from inefficiency or unequal market power?

Part of the answer lies in the uneven way price changes travel through the supply chain. Retail prices often rise rapidly during shortages but fall more slowly during gluts, a pattern known as asymmetric price transmission. Fixed distribution costs help explain the disparity, but market power matters as well. Small farmers who need to sell immediately may have only a few practical buyers, creating monopsony-like conditions. Traders, meanwhile, often have better information about prices in competing markets.

Collective selling offers one way to rebalance this relationship. Farmer Producer Organisations, or FPOs, allow small farmers to combine their harvests into larger lots, share transport and storage expenses, compare prices across markets, and negotiate with multiple buyers as a group. This creates economies of scale and reduces farmers’ dependence on the first available trader. A study of 108 tomato farmers in Maharashtra found that those using Farmer Producer Companies or contract-farming channels were less vulnerable to distress selling than those relying on conventional APMC channels. Collective selling does not eliminate the need for intermediaries. It gives farmers greater control over the terms of intermediation.

Collective action, however, cannot substitute for missing infrastructure. No individual farmer has either the capital or sufficient incentive to build the storage, processing, and forecasting systems needed to stabilize prices across an entire region. This is a classic market failure. Maharashtra should prioritise crop-specific storage, reliable harvest forecasts, and genuine competition among APMCs, FPOs, and private buyers. Policymakers should also avoid sudden trade restrictions that protect consumers today while weakening farmers’ incentive to produce tomorrow.

Seasonal volatility may begin with nature, but the market determines who pays for it. Maharashtra cannot eliminate unpredictable harvests. It can, however, strengthen FPOs, expand crop-specific storage, and improve access to reliable price information so that gluts do not become a crisis for farmers. The goal is not to remove every link from the supply chain, but to build one in which each link adds more value than cost.