Garlic prices surge again, yet trading volume drops noticeably

Take Beijing as an example: in June, the average wholesale price of garlic at the Xinfadi market was 2.5-3.2 yuan per jin, a full doubling compared with two months earlier.

Right now is the peak season for vegetables coming onto the market, and oversupply has pushed down the prices of most vegetables. Yet there is one variety that, even at its own peak marketing season, keeps climbing in price: garlic.

The reporter learned that since new garlic came onto the market in mid-May, the wholesale price of garlic has risen all the way, strongly suggesting a comeback of “Garlic you ruthless.” Yet just as the price climbs, garlic's market trading volume keeps falling, and there have even been cases of a price with no market. With no sales volume, what is supporting the garlic price? And how long can this good momentum last?

⟦NL> According to a report by China Rural Voice's “San Nong China,” the reporter recently visited farmers' markets in some areas and found that garlic, whose price had been relatively stable for a long time, is now soaring all the way. Take Beijing as an example: in June, the average wholesale price of garlic at the Xinfadi market was 2.5-3.2 yuan per jin, a full doubling compared with two months earlier. Such a price has even market stall owner Ms. Huang crying “I can't take it.”

Ms. Huang: The price of garlic has risen too fast recently. When new garlic came onto the market, the price was only just over 1 yuan per jin; now dry garlic has risen to more than 3 yuan. When we go to the market to stock up, I only take about 70—80 jin each time, and after selling for a few days I restock once. Because the price is rising so fast, and this is not a daily necessity for cooking, when it is expensive people just don't buy it, so I can't stock too much.

Beijing's garlic price has been soaring all the way, making Ms. Huang's stall look empty and deserted. And when the reporter subsequently visited major garlic-producing areas such as Jinxiang in Shandong, the situation was found to be the same. Jinxiang garlic distributor Xun Guoqing told the reporter that at present the trading volume of garlic in the market keeps declining, and many distributors are staying on the sidelines, not daring to act rashly.

Xun Guoqing: At present, 2.5 yuan is already the highest price some distributors can bear psychologically. If it goes higher, everyone will calculate storage costs, labor costs, and the rate of return on these investments, and will consider it relatively high.

Even so, everyone remains optimistic about the later market price and shows no intention at all of cutting prices to boost sales.

Shandong Jinxiang garlic broker Zong Xianxiao: Not selling; I'll sell when it reaches more than 3 yuan.

With no support from the market, why can the garlic price still rise so hard? Xinfadi Agricultural Products Wholesale Market vice chairman Yang Hongkai's explanation for this is the influence of policy encouragement and hot money speculation. At present, in Shandong there are even real estate developers launching a garlic-for-housing scheme, pushing up wholesale prices at the Shandong production areas, and in turn driving garlic prices across the country into the black.

Yang Hongkai: In Jinxiang, Shandong, when new garlic was first being collected, the government set a protective price of 1.71 yuan, and then local real estate developers hyped “2 yuan of garlic per jin for a house.” Garlic was not originally worth 2 yuan, but their hype was that if you sell me one jin counted as equivalent to 2 yuan, enough for the money for one sq m of housing, I will give you one sq m of housing. This is a signal to the market. As long as I have product, he is hanging it out there like a bounty; at any time I can take garlic and exchange it for a price, for real gold and silver, so farmers feel they should not lower the price.

For garlic farmers, lowering the price at this time is also very unsuitable. Wang Zhufeng, a garlic farmer from Dongbiezhai Village, Puyang City, Henan Province, told the reporter that this year the garlic bulbs he planted were smaller and the yield also declined somewhat, so he could only rely on the continuous rise in the purchase price to realize his own returns.

Wang Zhufeng: Although the price has been high recently, the yield is lower, so it is still about the same as last year. Originally one mu of land could produce more than 2,000 jin of dry garlic; this year it produced only more than 1,600 jin. When harvesting the garlic, I sold some of the smaller bulbs at the edge of the field as fresh garlic; now that they are sun-dried into dry garlic, the price can be even higher.

It is understood that most of the garlic currently on the market comes from Henan and Shandong. Because last year's price was relatively low, the two places successively reduced their garlic planting area, and it is precisely this characteristic that hot money seized on, which is why it dared to spend heavily on speculation. Xinfadi Agricultural Products Wholesale Market vice chairman Yang Hongkai predicts that this upward trend will continue until new garlic comes onto the market next year before it can ease.

Yang Hongkai: Its base price itself is high. If it relies on market adjustment, only after the Spring Festival each year, when new garlic comes down and old garlic cannot be sold, can it lower the price. Before the Spring Festival this garlic can be kept and stored, and garlic can be stored for up to two years, so it will not come onto the market in a concentrated way.

This year's garlic market inevitably reminds people of the “Garlic you ruthless” of 2010 and 2012. What we should be more vigilant about in the future is the price crash after “Garlic you ruthless.” Yang Hongkai especially reminds garlic farmers that what matters most at present is to sum up past experience and set a sales “alarm bell” in their minds.

Yang Hongkai: This year the government suddenly gave a protective price, so the garlic purchase price will be a bit on the high side. If there is a protective price this year, next year it will certainly stimulate farmers' enthusiasm for planting and correspondingly add some volume. A while ago I went specially to Jinxiang to investigate. In Jinxiang, including several garlic-producing areas in Shandong, the overall planting area this year has not decreased, but it has not increased much either, so garlic still has a sales trend of a thin stream flowing on and on.