Garlic prices are rising again; be cautious about investing in garlic cultivation, as high returns conceal major risks

This year, garlic prices have remained persistently high, and "Garlic you ruthless" has made a comeback once again. The continuous rise in garlic prices has ignited enthusiasm for growing garlic. According to reports, new garlic-growing areas around Jinxiang in Shandong, including Heze, Linyi and Liaocheng, are expected to see relatively large increases. The garlic planting area in Xuzhou and surrounding areas has increased by several hundred thousand mu. In some areas of Yunnan, Henan and Jiangsu, the increase in garlic planting area has even reached 20%-30%. Along with the surge in garlic prices and the expansion of planting area comes a sharp spike in cultivation costs.

Garlic is generally planted in October of the current year and harvested around June of the following year, with a growing period of about 8 months, almost as long as the growing period of winter wheat in the north. From plowing the land and buying garlic seed onward, until harvest the following year, aside from a good year in which each mu can produce about 400 jin of garlic scapes sold for 800 yuan, which offsets some of the family's own labor costs, growers keep investing. Once garlic is harvested, it directly faces the market, and added to this is upstream capital seizing the opportunity to speculate, making the garlic industry a place where high returns and high risks coexist. Here we may take garlic cultivation in eastern Henan as an example to calculate in detail the cultivation costs and returns of garlic and assess just how risky the current garlic price is.

First, costs. Since you are growing garlic, you have to buy garlic seed. Garlic seed is divided into whole bulbs and cloves; naturally, cloves are more expensive, and bulbs are also divided into dry garlic and wet garlic. This year, the price of dry garlic seed started at 5 yuan and rose all the way, reaching as high as 9 yuan at one point, and is currently stable at around 6 yuan, while wet garlic seed is cheaper because it needs to be dried by oneself, at about 2.6 yuan per jin, and the price of dry garlic cloves is about 8.5 yuan per jin. To plant one mu of garlic, depending on the size of the seed cloves, 240-300 jin of dry garlic bulbs are needed per mu. At 280 jin of garlic seed and calculated at 6 yuan per jin, about 1600 yuan is needed. Compared with the same period last year, among the above expenses, the price of garlic seed changed the most, about 4 yuan more per jin than when planting garlic last year, making it the largest single item of expenditure among all costs.

Labor expenditure accounts for another large part of the cost of growing garlic. Labor wages are affected by supply and demand and fluctuate considerably from year to year. But Henan is a populous province, and labor wages are relatively cheaper than in other garlic-producing areas. At present, female workers' wages are 60-80 yuan per day, with a few at 90 yuan; male workers' wages are about 120 yuan per day. Hiring people to plant garlic requires 200 yuan per mu, and spraying pesticides requires 50 yuan per mu. During the garlic growing period, watering is needed 5 times, and electricity and labor require about 250 yuan per mu. When harvesting garlic, machines are used to dig it out, and then it is trimmed by hand and put into woven bags of 50 jin each; the machine requires 50 yuan per mu, and manual labor requires about 400 yuan per mu.

In addition, mechanical plowing requires 50 yuan per mu; base fertilizer requires about 450 yuan per mu, and mid-season topdressing requires about 120 yuan, totaling about 600 yuan; seed dressing and coating per mu cost 60 yuan, plastic mulch 30 yuan, and pesticides 50 yuan, totaling about 140 yuan. Adding up all the above items, the cost of growing one mu of garlic in the 2016-2017 garlic season is about 3200 yuan, an increase of 50% over the previous season. This naturally does not include the grower's own labor. Since labor in Henan is somewhat cheaper, the cost of growing garlic in the garlic-producing areas of Shandong, Hebei, Jiangsu and Anhui will not be lower than in Henan.

Next, the yield and returns of garlic. Under normal conditions, the yield of wet garlic in eastern Henan is about 4000 jin per mu, and in exceptionally good cases it can reach about 5000 jin. Because the 2015-2016 garlic season had a good market, with purchase at the field edge, wet garlic was 2.5 yuan per jin. That is to say, after deducting costs, the net return per mu is about 8000 yuan. Generally speaking, every two jin of wet garlic can be dried into one jin of dry garlic, and each mu can produce about 2000 jin of dry garlic. At present, the purchase price of dry garlic is 5.8 yuan per jin, and the wholesale price is 6.1 yuan. If dry garlic is sold, the return can reach about 10,000 yuan. But one must bear the cost of drying wet garlic into dry garlic. In short, calculated according to ordinary yields, if the purchase price of wet garlic in the 2016-2017 garlic season is around 1 yuan, and the purchase price of dry garlic is around 1.6 yuan, one can break even. If the purchase price of wet garlic is around 1.5 yuan, the net return per mu is about 3000 yuan, which is already much higher than the net return from growing corn and wheat. And this year's net return per mu is about 10,000 yuan, and the huge profit has triggered enthusiasm for expanding planting.

Behind high returns there are often high risks. According to a 2015 study by Zhuochuang Information on garlic in Jinxiang, the safety margin line for the purchase price of dry garlic is 2600 yuan/mu; the lower it is, the higher the safety factor. If the purchase price of dry garlic rises above 3100 yuan/mu, risks will exist, and the higher the purchase price, the greater the risk. At present, the purchase price of dry garlic exceeds 10,000 yuan per mu, and moreover garlic prices have already experienced two consecutive rises in the 2015 and 2016 garlic seasons, and this year "Garlic you ruthless" is back, with retail prices heading straight for the 10-yuan mark, surpassing even the 2010 peak. It can be said that risks are brewing, and this should draw great attention from growers and investors.