Analysis of Chinese garlic market in 2020
Chinese garlic prices started low this year but have steadily increased. The overall surface area devoted to garlic plantation expanded and the production volume per hectare went up as well, but prices, however, have unexpectedly increased. How did the price of garlic grow this strong? The following factors played an important role in this development:
1. Garlic farmers panicked (huge supply volumes put pressure on the garlic price):
(a) Everybody knows that the outbreak of Covid-19 caused numerous obstructions for the distribution of agricultural products. Garlic farmers are afraid that a second wave of the virus will cause further problems. That is why they panic and eagerly sell their stock.
(b) The garlic sales season only lasts two or three months. If the garlic remains in storage for longer than that, the garlic starts to sprout green shoots. That is another reason why farmers want to get rid of their garlic as soon as possible. The market is flooded by huge volumes of garlic.
(c) The garlic trade came to a near stop in April and May of 2019. The price continued to decline. Some traders with stock in storage suffered financial loss. Garlic farmers are afraid the same situation will occur this year, so many of them rush to sell their products.
Farmers panic and bring large volumes of garlic to the market, which puts further pressure on prices.
2. Garlic traders are enticed by the low price (eager to fill their warehouses, traders stimulate the garlic price):
(a) The purchase price of garlic was low in 2018 and traders saw an opportunity for profit. Many traders and investment groups purchased garlic and stocked their warehouses.
(b) Storage space was hard to find as investment groups monopolized the warehouses.
(c) Domestic and overseas demand, especially from e-commerce platforms, rapidly grew stronger.
Although the volume of garlic from sources other than warehouses is currently smaller than in the last two years, the price is quite strong. However, as the temperature differences between day and night are growing, the garlic is starting to sprout green shoots. The product quality is rapidly diminishing, and so are the available sales channels. This type of garlic is not suitable for export, which leaves only the domestic market. Now that the temperature is slowly falling, the market demand for garlic from storage is gradually growing. Garlic from sources other than warehouses is slowly replaced on the market by garlic from storage. That is why the position of garlic from sources other than warehouses is gradually weakening.