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Chinese garlic export declines and domestic consumption remains weak

[Abstract]:

Data from the General Administration Customs China (GACC): shows that China exported 634,698 tons of garlic in the first five months of 2021. The export value reached 641.7 million yuan [99 million USD]. The export volume declined by 18.2% in comparison with the previous months, and by 57.82% in comparison with the same period last year.

The second wave of Covid-19, and in particular the appearance of different strains, has put more pressure on countries to implement preventative measures this year. On top of that, a ship was stuck in the Suez canal on the 23rd of March and obstructed the canal for six days. This incident threw shipping schedules into disarray and had a direct impact on the rising price of shipping. Furthermore, cold-storage containers were nearly impossible to find in May. Even the traders with garlic orders in hand are hesitant to accept the contract because they do not know how long it will take to secure shipping. All of these factors create major challenges in the Chinese garlic industry!

The shipping cost continues to rise and this has garlic exporters worried. In addition, the appreciation of the Chinese yuan is considered another disaster for garlic exporters whose competitive position in the international market grows weaker as the Chinese yuan grows stronger. That is why the export volume is down.

April and May are traditionally the peak months of garlic consumption in China. Many people enjoy preparing pickled garlic during this season, but this year the price of garlic rose too quickly when fresh garlic entered the market. Many people reduced their consumption volume, or even gave up on pickled garlic altogether. This immediately cooled down the domestic garlic market. When the fresh garlic entered the market, traders all repeated the news that there was a 'double decline' in overall surface area devoted to garlic plantation in 2021 and in the overall production volume.

When there is news of a 'double decline', traders are eager to purchase garlic early in the season in the hope that the price will go up. Early-season garlic was sold as soon as it was harvested. Even late-season garlic was reserved for prices between 4,000-5,000 yuan [617-771 USD] for the yield of 0.07 hectares. The garlic trade was flourishing early in the season.

The price of garlic is not expected to exceed 2 yuan [0.31 USD] per 0.5 kg until August. In April and May the price was around 1.5-1.8 yuan [0.23-0.28 USD] per 0.5 kg. Based on the ratio of early-season garlic, 0.5 kg of fresh garlic turns into 275-300 grams of dried garlic. Add to this the labor cost involved in the drying process, and the price of garlic is already up to 3 yuan [0.46 USD] per 0.5 kg. If the garlic is stored in refrigerated warehouses, then the estimated loss is rather high. The lowest price is around 1.5 yuan [0.23 USD] per 0.5 kg this year.

The overall production volume of Chinese garlic has been growing for more than 6 months now. In addition, the volume of garlic entered into storage in 2020 set a new record because the garlic price had been on the rise since 2019. Although processing factories have resumed operations again, there are still processed garlic slices and garlic powder in storage from three years ago. When will the market finally absorb the storage volume of garlic slices? That is a question to which nobody knows the answer!