Analysis and Forecast of the Reasons for the Garlic Price Increase in 2016 and the 2017 Price Trends

Looking at the agricultural products market in 2016, it was a case of some rejoicing and others worrying. Some agricultural product prices rose all the way, with bullish market prospects; while others attracted no buyers and struggled to escape the predicament of unsold goods.

Why has the agricultural products market been so unpredictable over the past year? Who is dictating the rises and falls in agricultural product prices? "Market Watch" presents its year-end special feature "Agricultural Products Market 2016," taking a detailed look at the price changes of major agricultural products nationwide in 2016 and forecasting the price trends for 2017.

After garlic prices soared in 2010, "Suan Ni Hen" (Garlic You Fierce) seemed to gradually fade from people's view. But since January this year, garlic prices have been rising all the way, and "Suan Ni Hen" has made a comeback, climbing continuously and surpassing the peak price of 2010. The garlic price in production areas even reached 6.65 yuan per jin, the highest in ten years. After distribution and transportation, the garlic that reaches consumers truly makes people exclaim they cannot afford to eat it!

So,in 2016, what factors were driving the frenzied rise in garlic prices? Can garlic prices return to normal in 2017?

At the Nanguan Vegetable Market in Shenmu County, Shaanxi Province, the reporter visited Hu Yongli, owner of Yongli Vegetable Wholesale Store. He and his wife have been engaged in vegetable wholesale here for 11 years. Hu Yongli told the reporter that this year's garlic prices really opened his eyes - it was the highest garlic price he had ever encountered. Currently, the garlic price in the store is 9 yuan per jin, and this year's lowest price was also 6.5 yuan.

Reporter: How much is garlic per jin at your place?

Hu Yongli: Nine yuan.

Reporter: What was the cheapest price you sold it for?

Hu Yongli: In summer it was six and a half.

Reporter: When did the price start rising?

Hu Yongli: Autumn.

Liu Xiuhong, at the farmers' market in Guanghan city, Sichuan Province, shares the same feeling as Shaanxi store owner Hu Yongli. She said this year's garlic price rise was so fast that she truly did not expect it. Starting from January at the beginning of the year, garlic prices had been on an upward trend. Currently, it has reached 8.5 yuan per jin, and the sustained high price has lasted for nearly a full year.

Liu Xiuhong: If the purchase price is high, of course we sell at a high price. We follow the market - if we buy at a high price, we sell at a high price. If prices drop later, we'll drop ours too.

Whether 9 yuan or 8 yuan, breaking past 6 yuan means a high price. With such high prices, did the distributors make a big profit? The reporter found during interviews that this was not the case. According to them, garlic was bought at 8.4 to 8.5 yuan and sold at only 8.6 to 8.7 yuan.

So how do garlic farmers in production areas feel about this year's high garlic prices? The reporter interviewed Mr. Xu, a garlic farmer in Jinxiang County. He said that in 2013 and 2014, garlic cultivation income barely broke even, but this year his family's income has indeed improved due to the high garlic prices.

Mr. Xu: Since New Year's Day 2016, it's been operating at a high price level, over 7 yuan. Garlic farmers can't sell at that much - if a garlic farmer can sell at five or six yuan, that's already good. The highest was six yuan.

Jinxiang County, known as China's garlic hometown, is the main production base for garlic in China. It plants over 500,000 mu of garlic annually, with an average annual output of about 1 million tons. According to Yang Guihua, executive president of the Jinxiang Garlic Industry Information Association, garlic prices have been rising since the beginning of this year, and by now have increased by more than 80%.

Yang Guihua: The highest price in 10 years. The last high price was in October 2010. When garlic breaks past 6 yuan, that's a high price. This time the highest was 6.5, 6.7. In mid-November - garlic comes to market in May and June, which is the lowest point, starting at 4.5. Entering November, it kept rising, with very few pullbacks. From June to mid-November, it kept going up.

As for the most fundamental reason for this year's garlic price increase, Yang Guihua, executive president of the Jinxiang Garlic Industry Information Association, told the reporter that it was mainly that garlic cultivation in various production areas suffered losses under extreme weather, reducing this year's total garlic output during the market period by 20%-30% compared to last year, leading to lower inventory levels.

Yang Guihua said that the size of cold storage garlic inventory determines the size of supply. September 1 is when cold storage garlic is put into storage, and this batch of cold storage garlic will supply the market until new garlic comes to market the following year. Last September, the storage volume in Jinxiang County was 1.54 million tons, while this year it decreased to 1.25 million tons.

Yang Guihua: This year's extreme weather reduced garlic, and inventory is low. Looking purely at inventory, our garlic storage last year was 1.54 million tons, and this year only 1.25 million tons - clearly more than 300,000 tons less. This proportion is not small. Small supply - this is still the main reason. Garlic cultivation ultimately comes down to supply and demand.

In 2016, garlic prices were so crazy. In the upcoming 2017, what will garlic prices be like? Will the upward trend continue? Industry insiders generally believe that garlic prices in 2017 will be far lower than in 2016. On one hand, the state is regulating; on the other hand, this year's garlic planting area statistics show an expansion of more than 20% compared to last year. The high prices brought garlic farmers enormous profits, which will greatly stimulate their enthusiasm for planting garlic. Garlic farmer Mr. Xu said that not only have areas in major production regions like Shandong, Henan and Jiangsu increased, but Yunnan's garlic area will also expand.

Mr. Xu: Too much has been planted. Next year's garlic will be cheap. Not only have I planted more, but in garlic regions, major production areas have planted more and non-major production areas have also planted more. Overall, more has been planted, so next year's garlic will be cheap and not worth as much.

Sharp price fluctuations are extremely harmful to the garlic industry, and garlic farmers do not wish to see roller-coaster market conditions. In Yang Guihua's view, the lack of an authoritative information release platform means farmers cannot fully understand information and can only plant blindly. All localities should strengthen the construction of agricultural product information platforms.

Yang Guihua: There is no authoritative information release. Much information is untrue. There is no information release agency supervised by relevant departments - this is a relatively lacking area. Right now, how much garlic is still in cold storage nationwide - who can say? Who will do it? If inventory is large, garlic prices will decline; if inventory is small, prices will rise. This information is very important. Relying solely on the strength of one association is not enough. The intensity of the garlic information industry should be increased, and integration would make it entirely possible.