The crazy garlic

International Herald Leader reporter Liu Ke and Pan Linqing reporting from Beijing and Jinan: A highway across Jining Jinxiang county, Jinxiang town in Shandong Province, dense piles of garlic can be seen everywhere on both sides of the road. A few kilometers away, South Dianzi Street is the largest Garlic market in China. People and cars are going in and out of the market; trucks loaded with garlic speeds by. People on the trucks seem to be in a hurry, but they cannot hide their excitement.

“I am not exaggerating, when two people meet here, the topics of the conversation cannot avoid garlic.” 48-year-old Sun Guangcai said, he is a garlic farmer in Jinxiang County. This county is the nation’s largest garlic planting base. Among the 800,000 mu of cultivated land 700,000 mu grows garlic all year round. It has lived up to its name of “China’s garlic capital”. (1 mu = 0.0667 hectare, 1 hectare = 2.471 acres, s0 1 mu = 0.1648 acres)

Since the Spring Festival (Chinese New Year) this year in February, the price of garlic here already rose from 80 cents per kilogram to 8 yuan per kilogram.

Ferocious “white tiger”

This year, the rate of garlic price increase is far exceeding the rate of increase in housing prices and stock market over the same period of time.

“I deal with garlic for more than 20 years now, and have never seen such a large price fluctuation.” garlic broker in Heze, Shandong Province, Chang Deyuan told the International Herald Leader. Last year, garlic was only selling for 20 cents per kilogram at many places in Shandong. But in the beginning of this month, the price of small sized garlic was already around 7 yuan per kilogram and garlic with diameter of 6 centimeters or above was selling for around 9 yuan per kilogram. Price soared 40 times comparing to same time last year.

To the general public, the increasing trend of garlic price seems to be formed overnight. But official data revealed the garlic prices are going up all over the country. Since this month the prices of garlic have risen to 10 yuan/kg and higher in Taiyuan, Lanzhou, Nanchang, Nanning, Hangzhou, Beijing and other cities.

In Hangzhou, the retail price of regular garlic has reached 12 yuan/kg, the price even reached 14 yuan/kg in large-scale supermarkets. With the soaring price almost as high as the price of pork which is 16 yuan/kg, garlic becomes the “aristocratic cuisine”. Not only garlic is rising in value, even the prices of garlic’s “relatives” – garlic bolt and ginger are continuously rising.

In Beijing’s largest wholesale vegetable market, the wholesale price of garlic in general is few cents to 1 yuan, at most around 2 yuan per kilogram. However in June this year, the new garlic on the market has reached 4 yuan per kilogram. In recent months, the price of garlic went higher from time to time, each time the price of normal garlic went up about 0.4- 0.6 yuan/kg and the price of single-headed garlic went up about 1-1.2 yuan /kg, and the price is still going up.

Retail prices are even higher. The lady boss selling vegetable at a vegetable market near Xizhimen in Beijing told the reporter, “Couple days ago, the price of white-skinned garlic was 16 yuan/kg, the price of red-skinned garlic was 20 yuan/kg.” But in the beginning of the year, the price of white-skinned garlic was just 3-4 yuan/kg, until the National day the price went up to 7 yuan/kg, and in the past month price skyrocketed to the current situation.

“We, in the garlic business, all call garlic the ‘White Tiger’.” Li Yumeng is a garlic dealer in Linyi City, Shandong Province. He has been trading garlic for 20 years now. Price of garlic is very volatile, every three to five years the price will fluctuate violently. Because garlic business is so risky, just like the terrible man-eating tiger, and plus garlic’s white skin color, people in the business call it the “White Tiger”.

This year, the rate of garlic price increase is far exceeding the rate of increase in housing prices and stock market over the same period of time. Some experts even said that this is a prelude of inflation. At this moment, the rising price of garlic has become a concerned topic of people at all levels from the government officials down to the ordinary people.

Use garlic to become a millionaire

I smoked cigarettes for the whole night, threw cigarette butts all over the floor. I repeatedly considered whether I should buy or not, after all buying with such a high price was too risky. Finally, I decided to gamble.

The first sign of price increase is in June, the garlic harvest season. At the time, garlic price in Shandong reached more than 2 yuan per kilogram. “You know last year no one wanted them even for 0.2/kg, I really could not decide whether or not to continue to acquire.” Chang Deyuan said. He owns two refrigerated storehouses with each capacity of 1,000 ton, to store the garlic he bought.

The next few days, the price of garlic as if was riding a rocket, rose to more than 4 yuan per kilogram. Chang Deyuan decided to no longer hesitate. “I smoked cigarettes for the whole night, threw cigarette butts all over the floor. I repeatedly considered whether I should buy or not, after all buying with such a high price was too risky. Finally, I decided to gamble.” Chang Deyuan said.

Thus, from the mid to late June, Chang Deyuan bought garlic from the surrounding areas, until the two storehouses of total capacity of 2,000 ton were full. Recently, Chang Deyuan just sold 400 ton of garlic for 8 yuan/kg. “I really didn’t think price of garlic would shoot up this high. Roughly estimating, I have already made 1 million this year.” Chang Deyuan said proudly.

This year, there was also another popular story circulating in Shandong Province. Early this year, five cargo workers saw the low garlic price and bought 700 ton of garlic. Together they paid the price of 24 cents/kg. In August of this year they sold all of them for 5.6 yuan/kg. They immediately became millionaires.

Over the past two years, the most famous vendors on Jinxiang garlic market are the “Four Garlic Kings”. These 4 people have over tens of thousands tons garlic in storage. This allows them to control the price trending of garlic. Many smaller vendors also followed their lead to make plenty of money.

The legend of “get rich quick” attracted more people into the ranks of trading garlic. When the money from all over the country flooded into Shandong for the garlic, purchasing garlic became increasingly difficult. These new buyers spent huge amount of money purchasing garlic from farmers and the garlic brokers. After the purchasing, they rented refrigerated warehouses to store them. Jinxiang had only 1,000 refrigerated warehouses, now this number is increased to over 1,400, the extra warehouses became the bases of the garlic newbies.

Cold storage is a must for storing garlic. “You need a warehouse, large amount of cash and several trucks. Just operate with these.” Morgan Stanley Strategist Logan concludes.

Hoarding garlic and the shortage of garlic created many new garlic brokers in Shandong. These brokers provided funds to local small-scale traders to go across the province to gather garlic. Brokers control a lot of garlic traders, these traders went to look for garlic farmers everywhere. This did not affect people from outside of the province, these garlic businessmen went directly to the garlic farmers.

Clearly, in order to survive, local garlic vender must raise the purchase price, to match the purchase price of garlic business from outside provinces. “Garlic traders are nervous like in a war, struggling and fighting for their share of garlic!” Chang Deyuan said.

Wenzhou is a place which is notorious for its businesses and businessmen. It was reported that 50 million yuan of Wenzhou idle fund went into northern markets to buy garlic. “Garlic business makes money. Wenzhou businessmen certainly will not miss this opportunity.”

Li Yumeng also believes that the idle fund investment played a major role on the soaring garlic price. He learned “When garlic was selling for 3 yuan/kg, idle funds from Wenzhou, Shanxi and Dongbei etc places, a total of 300 million to be conservative to invest in garlic. When the price was pushed to 4 yuan/kg, they sold, profited and pulled out completely.”

Today, this garlic trend is extended to the Internet. On November 28, there were people on “Taobao” selling garlic, one Shandong Garlic for 7 yuan.

H1N1 flu

The H1N1 epidemic spreading across the globe has become the psychological support for garlic businesses to raise the garlic price.

“It’s all TV’s fault! It said eating garlic can prevent H1N1!” Ever since the H1N1 epidemic, China is rumored with garlic’s effectiveness of preventing swine flu. Even some of the media experts say the United Sates also put garlic as the number one of the nine vegetables that can kill germs and bacteria.

November 16, Wuhan City director of the Association of Licensed Pharmacist He Shuiping said “For everyone, eating garlic can prevent H1N1 flu.” He also recommended garlic enteric-coated capsules.

The theory of eating garlic can prevent H1N1 flu became increasingly popular. Obviously it had some impact on the garlic prices. A Jr. high school in Hangzhou required students to eat garlic every day. This school bought 200 kilogram of garlic and ordered them to be delivered with students’ lunch every day. Each student was required to eat one every day.

Although later number of medical authorities including Zhong Nanshan said “Garlic indeed can kill bacteria, however currently there is not enough evidence to prove that garlic can prevent H1N1 flu.” The statement did not deny the theory, so garlic kept its hot streak.

It is not only the Chinese people are fighting over garlic. International demand of garlic is also high. Number of countries started to increase the imports of garlic this year. Japan, South Korea and countries in Southeast Asia purchased large quantities of garlic from China, increased China’s garlic export.

Use Jinxiang county as an example, the first three quarters of this year, the county’s garlic export revenue was 134 million U.S. dollars, an increase of 20%. Exports rose, adding to the garlic shortage in China. The H1N1 epidemic spreading across the globe has become the psychological support for garlic businesses to raise the garlic price.

The restless good times

When the garlic price bubble bursts, the people ultimately suffer the most may be the garlic farmers.

Deputy Secretary of Agriculture in Heze City, Li Huaichun thinks that one reason of rising garlic price is “shortage”. He told the International Herald Leader, “In 2007 and 2008 the price of garlic was very low therefore it affected farmers’ enthusiasms for growing garlic. The garlic planting decreased. Heze and its surrounding area is the nation’s largest garlic producing area. In 2008 there were 800,000 mu of garlic harvest land, but in 2009 there were only 600,000 mu of garlic fields. Decline in garlic planting let to less garlic production.”

The main reason of garlic shortage is due to the low market prices in the previous two years. “Cheap garlic hurts farmers” which caused garlic cultivation to drop significantly. According to statistics released by China’s garlic network: in 2007 there were total 10.1 million mu of garlic fields, in 200 it fell to 5.5 million mu.

Looking at the garlic market trend for the past few years – 2004 and 2005, the price of garlic has been in a growth trend, to march 2006 the price reached to a peak, garlic traders profited greatly.

Profiting is the nature of a businessman therefore many people entered the business of trading garlic. After that, garlic fields expanded year after year. The direct consequence of this was in the next two years, garlic price went way down, garlic did not sell well and farmers suffered huge loss.

“Last year, the price of garlic bottomed out, all the hard work went down the drain. This year is better, but the cost of plastic, seeds, pesticides and labor is probably about 1,200 yuan on every mu of land. The production is 2,000 Jin (1 Jin = half kilograms) garlic on each mu. Say 80 cents per Jin, it is only 400 yuan of profit. When the price is good, over 1 yuan per Jin, then the profit will be 1,200 yuan.” Sun Guangcai said “Normally per family per person has 1.3 mu of land, so the half-year income per person is 1,500 yuan. The difference between sales price and the retail price is too great.”

The price of garlic is still rising. Sun says he is also not sure how long it will go up for. This year’s garlic market is good, he has already made more money than previous years, but he still worries, “Will the price of garlic like three years ago, fall sharply again?” Then he will suffer loss like last two times.

“Actually, we do not want the prices to be this high!” Sun Guangcai still says that. In another words, he does not want to experience the cycle of falling prices again.