China's garlic casino

Garlic. [Photo/IC]

ZHENGZHOU - Being a garlic farmer in China is like riding a roller coaster at times, with garlic prices full of dramatic ups and downs.

Mao Guangsong, in Zhongmou county, central China's Henan province, has been growing garlic for 37 years. He has just had his best year thanks to the soaring price.

"I made 170,000 yuan ($24,750) from 17 mu (about one hectare) of garlic. It was sold at 10 yuan per kilo when harvested in May, about double the price a year ago," he said.

The garlic price has been shooting up since July. Government statistics shows that the wholesale and retail price of garlic were 14.48 yuan and 15.78 yuan per kilo in October, surging by 90 percent and 67.9 percent respectively year on year.

Mao Shengyong, spokesman of the National Bureau of Statistics, said that the rising garlic price should not be seen as a sign of inflation but a temporary phenomenon fueled by poor weather and speculative buyers.

Freezing rain and snow last year in the main growing areas such as Shandong and Hebei provinces affected garlic supplies. This year, total garlic production is about 20 percent lower than last year, said Yang Guihua, secretary-general of the China Garlic Industry Information Union.

With expectations of rising price, money has been rapidly flowing into the garlic market.

With 4 million yuan's capital in pocket, Zhang flew from Yunnan to Shandong in May and bought around 400 tons of garlic in Jinxiang County. "I estimate I will make some 700,000 yuan," Zhang said.

Xiao Sanbao, deputy head of cold storage in Zhongmou County, said that one local farmer recently sold 60 tons of garlic he had hoarded, making 200,000 yuan at 37 percent profit margin.

Mao Xiao'an has been a garlic merchant in Zhongmou for over 20 years. He said he made over 1 million yuan by investing in garlic this year alone.

Interest at risk

Mao Guangsong has felt many garlic price fluctuations during the past ten years.

In 2008, He lost nearly 20,000 yuan in his 10 mu of garlic, as the price suddenly dropped to 0.4 yuan per kilo from two yuan per kilo the previous year.

"The price was so low that many farmers just left their garlic in the field to rot as the money made by selling garlic was not enough to pay people to harvest it," he said.

In 2009, garlic price started to go up, and the retail price hit 16 yuan per kilo in May. "I remember that one cart of garlic was resold ten times, and the price increased from 800 to over 3,000 yuan per tonne," he said.

"I joined the speculators and sold the garlic for 4,000 yuan per tonne later on," he added.

However, the price dropped dramatically in 2013, and Mao lost 2 million yuan, and he dared not hoard garlic again after that.

"The price is so unpredictable," he said. "The big buyers are more likely to gain as they usually hoard tens of thousands of tons to force the price to go up, then sell it quickly, while smaller buyers are often too slow to react to the price change."

Like many other farmers, Mao enlarged his garlic field by 10 mu this year despite the possibility of a price decrease next year.

"As long as the price does not drop too sharply, I can still make some money by growing more," he said.

Action in need

Many have called on the government to stabilize garlic prices and protect growers' interests.

Liu Shaochen, head of cold storage and fresh keeping in Zhongmou, said that investors should be prevented from storing up large quantities of garlic in order to ensure market supply.

Xiao Sanbao suggested the governments store up garlic when there is an oversupply and release the inventory when the price surges.

The National Development and Reform Commission said last week that it has ordered the provinces of Shandong, Henan and Jiangsu to carry out an inspection of garlic prices, and that illegal speculation to drive up prices will be punished.

Experts also hope that a database to supervise the country's garlic planting, production, inventory, and exports can be established to increase the transparency of the market and reduce unreasonable expectation and speculation.

Xiao said it is important to control the growing of garlic to stabilize production. "I'm quite worried about the farmers' income next year as the high price has encouraged farmers to increase planting, which is likely to lead to a price drop," he said.

"Governments are expected to offer more guidance to garlic growers who are usually ill-informed about the market," Liu said.