The Truth About Making Millions from Onion Farming in 3 Months

They say it’s easier to make millions farming bulb onions in just 3 months. But how true is that?

What are the true costs you will incur when farming bulb onions – from leasing the land, installing an irrigation system, buying seeds, planting, controlling diseases, up to harvesting?

What is the average yield for most farmers and the prevailing prices?

At the end, you will understand the math and figures they never tell you – whether this is a profitable business or not, and if it is, when and how farmers make the profit.

Understanding the Costs First

To understand the business of onion farming and its profitability, we have to check costs first.

Fixed Costs

Land Lease: Assuming you don’t have land and you need to lease, this is a fixed cost.

An acre of good fertile land with access to permanent water, security, and accessibility often costs at least KSh 20,000 per year. For good profits, lease for at least 5 years.

Irrigation System: Bulb onions need a good, sustainable irrigation system that will provide water throughout the season, given that you cannot rely on rainfall alone.

A drip irrigation system is the most efficient when it comes to bulb onion farming. An acre of drip irrigation costs about KSh 150,000, excluding a water tank and water tower.

If you add a 10,000-liter water tank and water tower, the total irrigation cost comes to KSh 220,000. This brings the total fixed cost to KSh 240,000.

This can be divided into four seasons while calculating profitability, with each season costing KSh 60,000.

Read Also:Cheap Onion Varieties in Kenya with 15T Yield 90day Maturity

Production Costs (Variable Costs)

With that set, let’s get into the production costs:

• Land Preparation: Ploughing 1 acre costs KSh 6,000 and KSh 4,000 for fallowing. You have to establish about 100 beds, each with a labor cost of at least KSh 100. That’s KSh 10,000, making the total cost of land preparation KSh 20,000.
• Seeds: A good kilo of hybrid onion seeds costs KSh 45,000.
• Fertilizer: 2 bags of DAP and CAN cost KSh 23,000.
• Manure: Costs KSh 10,000.
• Water: Will cost about KSh 25,000.
• Pest and Disease Control: Since you have to control insects and fungal diseases, this will cost you KSh 40,000.
• Labor: You will also need a permanent laborer and casuals for planting, weeding, and harvesting, which will cost you about KSh 80,000.
• Miscellaneous: You also have to add miscellaneous costs of about KSh 20,000.

This brings the variable cost of onion farming in Kenya to KSh 243,000.

If you add the fixed cost of land lease and irrigation (KSh 60,000 – irrigation and lease cost divided into 4 seasons), it gives the total cost of onion farming per acre at KSh 303,000.

In an actual sense, in the first year you will spend KSh 483,000 (KSh 243,000 for variable costs and KSh 240,000 for leasing and irrigation). The question is: is it worth it?

Revenue Analysis

Let’s look now at how much you will make. In this case, we shall be as realistic as possible. We all know that rarely do farmers produce above 15 tons per acre.

Those who are lucky do 10-15 tons. The majority produce below 8 tons per acre.

This is where people get it wrong while calculating profit-cost analysis of onions or any other crop for that matter – using the prevailing market price.

This will always give you false figures. These prices in most cases are usually double the farm gate price.

On average, the farm gate price for a kilo of bulb onions ranges between KSh 20-30, with market price being KSh 50-60.

For this case, we shall use KSh 30 per kilo, but it’s always good to know it can fall to KSh 15 per kilo.

Profitability Scenarios

We shall also use 3 scenarios:

• Conservative: where you produce 10 tons
• Average: where you produce 12.5 tons
• Optimal: where you produce 15 tons per acre

This means after selling at KSh 30 per kilo, you make:

• KSh 300,000 with 10 tons
• KSh 375,000 with 12.5 tons
• KSh 450,000 with 15 tons

Profit/Loss Analysis:

• If you produce 10 tons, you make a loss of KSh 3,000 (KSh 300,000 – 303,000)
• If you harvest 12.5 tons, you make a profit of KSh 72,000 (KSh 375,000 – 303,000)
• If you produce 15 tons, you make a profit of KSh 147,000 (KSh 450,000 – 303,000)

Subsequent Years

If you continue onion farming in subsequent 2-5 years, the cost falls as the cost of drip irrigation is not added – only the cost of lease.

For instance, in the second year, the cost per acre comes to KSh 249,000 (KSh 243,000 + KSh 6,000 lease cost).

But there is a great chance for costs to increase as the cost of fertilizers, seeds, and chemicals increase, making this business of onion farming uncertain.

Therefore, it calls for new cost analysis every year or half-year as prices of inputs and market prices for onions change.

Conclusion

Onion farming can be profitable only depending on how well you manage your costs and, of course, the prevailing market prices.

Many times the market floods and prices crash due to an influx of onions from Tanzania. Rare are the times when there is market scarcity, pushing prices to above KSh 70 a kilo.

The secret is constant production in order to benefit from the rare moments of high prices, which will help you recover losses from past seasons.

Disclaimer: Prices and costs mentioned in this article are based on current market conditions and may vary. Always conduct your own market research before making investment decisions.

About Post Author