Garlic prices hard to predict? Garlic farmers and traders on the calculations behind garlic speculation

"There's a saying in the garlic industry called 'garlic is hard to predict.' I've grown garlic for over 30 years and still haven't figured out the temper of garlic prices," said Mao Guangsong, a garlic farmer from Maoguai Village, Dameng Town, Zhongmu County, Henan Province. He started growing garlic in 1979, has witnessed garlic's wild price swings, and has tasted the full range of a garlic farmer's joys and sorrows.

"This year is the most profitable year I've had growing garlic in all these years, earning 10,000 yuan per mu," Mao Guangsong said. Last year he planted 17 mu of garlic, and when he harvested it in May this year, dry garlic sold for more than 5 yuan per jin, more than double last year's price.

Since July this year, garlic prices have kept rising, with the price coming out of cold storage reaching as high as 7 yuan per jin, and some supermarkets even exceeding 10 yuan. Ordinary people exclaimed that "Garlic You Ruthless" is back.

In Mao Guangsong's memory, the wild swings in garlic prices are only a matter of the past 10 years. He clearly remembers the big garlic price crash in 2008.

"At that time, wet garlic was just over 2 mao per jin, and no one came to harvest the garlic in the fields, because the money from selling it wasn't even enough to pay the workers. Later, large patches of garlic were plowed back into the ground. The garlic stored in cold storage couldn't find its owner, and everyone abandoned it, because the money from selling it wasn't enough to pay the cold storage fees," Mao Guangsong said.

That year, Mao Guangsong planted 10 mu of garlic and lost nearly 20,000 yuan. Those who lost the most weren't the garlic growers, but the garlic hoarders. Garlic stored at more than 1 yuan per jin in 2007 sold for just over 2 mao per jin in 2008. Liu Shaochen, president of the Zhongmu County Cold Storage and Preservation Association, lost more than 8 million yuan, and as of this year he still hasn't fully earned it back.

The garlic price slump continued until March 2009, but after new garlic came on the market in May, garlic prices began to rise, with the ex-warehouse price once reaching 3.5 yuan per jin, while supermarkets charged as high as 8 or 9 yuan. The term "Garlic You Ruthless" originated from that wave of garlic price surges.

"Those who had stored garlic before truly got rich overnight, making a net profit of more than 6,500 yuan per ton," Liu Shaochen said. "But I had already lost everything the previous year, didn't store any garlic, didn't make any money, so garlic prices are hard to predict."

But in that wave of price increases, Mao Guangsong didn't make much money either; he sold at just over 2 yuan per jin. "For garlic farmers, you have to sell whether the price is high or low. By September, if you don't put it in cold storage, it will sprout."

Mao Guangsong said that it was from 2009 onward that the "garlic speculator army" suddenly emerged, and the trend of "speculating on garlic" grew heavier and heavier. "In 2009, I remember one truckload of garlic passed through 12 people's hands, getting speculated up from 800 yuan per ton to more than 3,000 yuan. I also joined in, bought some and stored it for a while, then sold it at 4,000 yuan per ton."

But the garlic price crash in 2013 cost Mao Guangsong more than 2 million yuan, and after that he never hoarded garlic again. "Speculating on garlic is 'big money eating small money.' Some big players hold several hundred million yuan and store 30,000 to 40,000 tons at a time. After driving the price up, they quickly sell off. Small players follow the big players and often fall into the ditch, unable to sell before the garlic price drops," Mao Guangsong said.

Liu Shaochen said that big players tend to do research: when garlic is being planted, they investigate the planting area; when garlic scapes come out, they judge the yield; and at harvest time, they investigate the yield again. So the information they have is far more than what small players have. But even so, big players sometimes lose too; no one can completely control the price.

"Speculating on garlic also has its conditions. Only when supply is small can it be speculated up. Like this year, because of weather-related garlic production cuts, some capital came in, hoarded garlic, intensified market shortages, and helped push garlic prices up. On the other hand, the lack of transparency in market information also leaves room for garlic speculation," Liu Shaochen said.

Now, besides growing garlic every year, Mao Guangsong also trades agricultural products such as garlic scapes, radishes, and onions. Their prices also rise and fall, and he has long grown accustomed to it.

This year Mao Guangsong rented more than 10 mu of land again and planted 30 mu of garlic. He knows that farmers in surrounding counties and cities have also increased their garlic planting area, and next year's price may fall, so why does he still plant it?

"Judging from my more than 30 years of experience growing garlic, years with wild price swings are still few. Most years are average. As long as the dry garlic price doesn't fall below 1.5 yuan per jin, you can still make a little money, and overall it earns more than growing wheat," Mao Guangsong said.

Mao Guangsong said he knows that for a minor commodity like garlic, the government cannot manage it entirely the way it manages grain; it still depends on the market. But he hopes the government can set up more agricultural subsidies or insurance, so that farmers can work the land with more peace of mind, because he has learned from experts that European and American countries provide very large agricultural subsidies.