Garlic Prices Surge Sharply Again Before Spring Festival
“On the day of the “Laba Festival”, Ms. Yu had a sudden urge to make some Laba garlic, but when she asked at the market, the price of 7.5 yuan per jin really startled her. Ms. Yu said that in her hometown of Henan, there is a custom of eating vinegar-soaked garlic on the eighth day of the twelfth lunar month - it tastes good and can kill bacteria. She just remembered that garlic was a very cheap thing, so she had no idea the price was even higher than eggs. Statistics from Yiwu Agricultural Trade City show that since New Year's Day this year, the wholesale price of garlic has been around 5.5 yuan per jin. Regarding the jump in garlic prices, vendor Ms. Chen told reporters that supply-demand imbalance and artificial speculation may be the driving forces behind it.
Garlic Prices Rising Quietly
Recently, in the retail area of Yiwu Agricultural Trade City, garlic was quoted at about 8 yuan per jin. Vendor Ms. Wang said that before New Year's Day it was around 6.5 yuan per jin, and the slow price increase began around late November last year. “When new garlic came on the market in late May 2015, the price was still okay, with the market wholesale price at around 3.5 yuan per jin. Later, in July, garlic from the production areas began to be concentrated in storage. By the time storage was completed, the price had risen slightly to around 4 yuan per jin. By November, rain and snow increased in Shandong, and the wholesale price of garlic began to jump, and it has not come down since.” Ms. Wang said the current price is almost catching up with the peak garlic price period in 2010, when the wholesale price was close to 8 yuan per jin.
It is understood that most of the garlic on the Yiwu market comes from Shandong, and the increase in retail prices is largely due to price increases at the place of origin. Agricultural product price monitoring data from Zhuochuang Information shows that since garlic's wholesale price at the place of origin fell from its pedestal in 2011, it has been fluctuating up and down. In January 2012, the wholesale price of garlic was about 1.05 yuan/jin; in the same period of 2013 it rose to 3.2 yuan/jin; in 2014 it fell back to 1.2 yuan/jin; in 2015 it rose slightly to 1.9 yuan/jin; and in 2016 it soared to 4.7 yuan per jin. Once prices at the place of origin rise, the retail end naturally cannot hold them down either.
Supply-Demand Imbalance Is the Main Cause
When it comes to the reasons for price increases, in most cases it is because things are precious when they are scarce, and garlic is no exception. Vendor Ms. Chen is from Shandong. According to her, since 2010, garlic prices have been hovering at low levels, damaging the enthusiasm of garlic farmers, and old garlic inventory has decreased year after year. In 2014, garlic prices were especially low, and many garlic farmers reduced their planting area, causing garlic output to decline.
On the demand side, China is the world's largest producer and consumer of garlic. The continued depreciation of the RMB exchange rate has led to a favorable export situation for garlic, and suppliers have chosen to export garlic one after another, causing a shortage of domestic supply. Therefore, starting at the end of last year, garlic prices rose by a relatively large margin.
In addition, speculation by hot money also pushed up garlic prices to a certain extent. “The jump in garlic prices has an element of speculation.” said Cui Xiaona, an agricultural product analyst at Zhuochuang Information. From the perspective of output, although garlic production declined in 2015, the reduction was not large, at about 10%, which is not enough to drive a substantial increase in garlic prices.
“Garlic speculators are generally major players in the industry who have long been engaged in garlic distribution and saw business opportunities in the imbalance between garlic supply and demand. By encouraging garlic farmers to hold back sales, borrowing funds to stockpile large quantities, and other methods, they artificially drive up prices and then wait for an opportunity to sell off for profit.” Cui Xiaona said that agricultural products with relatively concentrated production areas, good storability, and low unit prices are easily targeted by hot money.
However, judging from the wholesale and retail situation in recent days, the possibility of continued sharp increases next is not great. “The current price level is already high. A few days ago, the wholesale price even fell by a few mao, and once the concentrated Spring Festival consumption period is over, there will be even less momentum for price increases.” Ms. Chen said.