Garlic prices are once again seesawing. What is the reason?
Since June last year, garlic prices across the country have continued to rise. At the Beijing Xinfadi Agricultural Products Wholesale Market, known as a "barometer" of agricultural product prices nationwide, the wholesale price of dry garlic once reached as high as 7.8 yuan per jin in late October, 18.2% higher than the historical peak of 6.6 yuan per jin. People exclaimed: "Garlic, you're ruthless" is back.
Recently, at the entrance of a farmers' market near Taoranting in Xicheng District, Beijing, vegetable vendor Fu Erjun was moving garlic into the market, marked at 10 yuan per jin. Many consumers who came to ask about prices felt the price was high.
"This round of garlic price increases and high-level operation is primarily due to a reduction in the national garlic planting area," said Kong Fantao, chief expert of the Vegetable Market Monitoring and Early Warning program of the Ministry of Agriculture. China's garlic planting area accounts for more than 50% of the global total, and its output accounts for about 70% of the global total, with annual output and export volume both ranking first in the world. The domestic garlic planting area has remained basically stable at 4 million mu in recent years. Garlic prices were relatively low in 2014, and since last year some vegetable farmers in the main producing areas have reduced their garlic sowing area. Monitoring data from the Ministry of Agriculture on 580 key vegetable counties nationwide show that the garlic area in the fields in 2015 fell by 2.2% year on year.
During this year's Spring Festival, the main northern producing areas suffered a severe cold wave, resulting in large-scale total crop failure of garlic in the main northern producing areas. Fu Erjun said that in Jinxiang, one mu of land could produce three to four thousand jin of fresh garlic in past years, but this year only a little over 2,000 jin was harvested. Kong Fantao estimated that, affected by both the reduction in planting area and the cold wave's reduction in output, garlic output in the main producing areas this year fell by about 8%.
In addition to output reasons, some industry experts also believe that the root cause of the abnormal surge in garlic prices lies in hot money hoarding, which added fuel to the fire. When new garlic from the main northern producing areas came onto the market in May this year, the market already showed signs of speculation by hot money. Under normal circumstances, after fresh garlic begins to come onto the market, prices gradually decline as the volume coming onto the market increases. "This year's garlic prices are somewhat abnormal," said Liu Tong, manager of the statistics department of the Beijing Xinfadi Agricultural Products Wholesale Market. In the first week of May last year, the price of fresh garlic dropped from 1.5 yuan to 2.1 yuan per jin to 1.3 yuan to 1.8 yuan, a decline of 13.89%, while this year it rose by 13.64%, the opposite trend from the same period last year.
"Some private capital has spent heavily to enclose land in the main producing areas and control garlic sources, which is one of the reasons for the large and rapid increase in garlic prices," said Li Huishang, associate researcher at the Institute of Agricultural Information of the Chinese Academy of Agricultural Sciences. China's garlic production and market have 3 obvious characteristics: first, production areas are concentrated, with the main producing areas at the junction of Shandong, Henan and Jiangsu; second, the market is immature, as the total volume of garlic is small and the market is small, so after investors or distributors gain control of resources, they can manipulate market prices through collusion, alliances and other means; third, garlic is easy to store after air drying and irradiation, so investors can operate flexibly according to market conditions, hoarding and dumping at the right time to obtain maximum profit.
As garlic prices rose abnormally, some merchants made a big profit by hoarding, but some also lost money. Mr. Liu of the Beijing Xinfadi Agricultural Products Wholesale Market was one who lost money. In early May, seeing that fresh garlic prices rose rather than fell after coming onto the market, he decisively bought 20 tons of fresh garlic at 2.5 yuan per jin, artificially dried it into 12 tons of old garlic, and planned to sell after prices continued to surge, but afterward garlic prices gradually fluctuated downward. On May 6, the average price of ordinary fresh garlic at Xinfadi was 2.5 yuan per jin, and by May 26 it had fallen to 1.15 yuan; the average price of old garlic at Xinfadi on May 6 was 5.6 yuan per jin, and by May 26 it had fallen to 4.75 yuan. At the bottom of the price, Mr. Liu admitted the loss and exited. In October, the price of dry garlic per jin broke through 7.5 yuan, but downstream demand fell a lot. "Garlic prices are too high, consumers reduce consumption, and it is hard to sell if I bring in too much." Mr. Liu used to bring in two truckloads of garlic from Shandong every week, but now he only dares to bring in one.
Fu Erjun said that previously he could sell more than 80 jin of garlic heads a day, but now he can only sell thirty to forty jin a day. "At the Beijing Xinfadi Agricultural Products Wholesale Market, dry garlic used to trade 200 tons a day, but now only about 100 tons a day. The wholesale price can reach as high as 7.8 yuan per jin, which I have never seen in many years. It has really risen too much. The producing areas ask for high prices, not much different from Xinfadi market prices, and merchants dare not buy too much or sell too much, and most are losing money," Liu Tong said.
Judging from the pattern of garlic price movements, the characteristic of a 3-year cycle is relatively obvious. Generally, prices peak and then fall after new-season garlic comes onto the market successively. From 2012 to 2013 was a rising cycle, followed by continued sluggishness. From 2015 to 2016, garlic prices have been running at a high level for more than a year. Looking ahead, industry experts predict that national garlic prices will generally fluctuate downward.
Although garlic is a minor agricultural product, its sharp price fluctuations pose extremely huge risks to producers and operators. Li Huishang suggested: relevant departments should strengthen market monitoring and information services, promptly release information on planting area, output, market prices, and inventory and consumption, guide farmers to arrange production rationally, so as to stabilize planting area and output, ensure basic stability of market supply, and severely crack down on illegal acts such as hoarding for speculation and driving up prices.