Food Industry News

China garlic speculators waiting for super-profits

of garlic Companies in China benefited from rising prices and reduced deliveries for excessive profits - they do not hurry to sell their existing stocks of garlic and wait for further price increases.

Their actions are exacerbating the acute situation in the world market of garlic, which is the largest player in China, according to RNS.

Cost of garlic in China increased by 85 12% over the past months - up to 13,75 yuan ($ 2,03) per kilogram, which led to a rise in price of garlic in the US 60%. For this reason, many Chinese suppliers of garlic to postpone the sale of goods in anticipation of further price increases, writes The Wall Street Journal (WSJ).

Adverse weather conditions have led to a reduction in the harvest of garlic in China, which is the world's largest exporter of garlic - it accounts for about 80% of world supply. As a result, China has reduced the export of garlic for the first nine months of the year to 2016 11% compared to the same period last year - up to 1,17 million tons, or about 390 billion heads.

"The rise in price of Chinese garlic is mainly due to the reduced volume of deliveries", - said the general manager of Factum Group Lydia Xin. She also noted that a large number of speculators in the Chinese market is also common.

Interviewed by the newspaper, experts expect that due to the low volume of deliveries to garlic prices will remain high at least until June next year, when the start of the next collection of garlic harvest in China.

According to the managing director of the German company for the production of flavorings AKO Olaf Richter, Europe will have to adapt to the new prices of Chinese garlic, and product buyers all over the world have already experienced the effect.

garlic speculators

Garlic, like many other Chinese agricultural products, attracting a large number of speculators, continues WSJ. The fact that the crop is harvested once a year and sold slowly during the year - until the next harvest. Sellers keep the garlic in warehouses with controlled temperature and increasing sales as the reduction of the total volume of deliveries, which enables them to earn extra income.

One trader in Henan Province in eastern China told the WSJ, that is currently stored in its warehouses about 4 thousand. Tons of garlic and that he was waiting for the price increase before the start of sales.

"We want to sell as much as possible to take advantage of good prices. This is best done before June 2017 year - the date of the next harvest, "- said one of the merchants on garlic Ma surname. He added that he does not consider his actions as speculative, and considers himself a "prudent businessman".

A similar situation was observed in 2009-2010 years during an outbreak of influenza in Asia, when speculators contributed to a rise in price of garlic in 40 times - up to 8 yuan per kilogram ($ 1,18 at current exchange rates). Then speculators took advantage of an increase in the garlic in demand due to the fact that its use is considered to be useful during cold and flu.

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