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USA TODAY
Wrapped up in earmuffs and a heavy jacket to fight the Beijing winter, Liu Zhan shows little sign of soaring wealth. Until he removes his gloves — and reveals a large gold ring. At the Chinese capital’s biggest vegetable wholesale market, other traders call him “Millionaire Liu.”
The pungent root of that nickname is stacked in bags on and around Liu’s haulage truck. Garlic prices have jumped so high in China that the crop has outperformed gold and stocks to be the country’s best performing asset this year.
As H1N1 swine flu continues to worry China’s leaders — who are rolling out a nationwide vaccine program — its people seek a more traditional remedy. Just as some Chinese turned to turnips to prevent the SARS virus in 2003, garlic has emerged as a swine flu fighter in 2009.
“Garlic kills bacteria, and I eat at least half a bulb each day,” says Liu, 43, whose prices have leapt from just five cents a pound in February to almost 55 cents today.
Although Chinese government experts have cautioned consumers about the lack of scientific proof for garlic’s flu-killing powers, its supporters remain adamant. “Garlic can definitely help prevent swine flu,” claims Li Jingfeng, chairman of the Jinxiang Garlic Association in eastern China’s Shandong province.
Self-promoted as China’s “hometown of garlic,” Jinxiang county grows a quarter of all garlic in China, which in turn provides more than a quarter of global output, says Wang Hao, marketing manager for the China Garlic website. Jinxiang, whose name means Gold Village, has enjoyed its best-ever sales year, says Li.
“Next year, the price will be even higher, but our American and European buyers still think it’s cheap, as garlic sells for $6.60 for a pound in their countries,” he says.
A windfall for U.S. producers
The Chinese price hike has been a boon to U.S. garlic producers, says Bill Christopher, owner of Christopher Ranch in Gilroy, Calif., the largest U.S. garlic producer.
“There’s a lot less Chinese garlic being shipped over here, and what is being shipped is being shipped at prices three times more than last year,” Christopher says. “There’s a bit of a world shortage and of course that raises the price.”
Chinese garlic usually accounts for 90% of the U.S. import market, which supplies more than half of the bulbs consumed in the nation, Christopher says. This year, the Chinese have shipped about half the usual 200 million pounds of garlic, and the price has tripled since last year, from about $8 to $24 for a 30-pound box. For U.S. producers, whose higher quality bulbs sell for $40 to $50 a box and are marketed to restaurant chefs, prices have risen 15% to 20%, he says.
The cost of U.S. garlic rises every year, in part because of ongoing water shortages in California, “but (this year) that’s more than going to be offset by increases in the sale price due to the Chinese not shipping as much garlic,” Christopher says.
H1N1 only partly explains the garlic fever, Li says. Rising prices in 2006 sparked a rush to plant garlic that created a market glut over the next two years. Falling acreage and bad weather combined to leave suppliers in the driver’s seat this year, he says.
The real winners appear to be speculators such as Shao Mingqing, a jobless 22-year-old who borrowed money to buy 100 tons of garlic in September, then made a $59,000 profit selling in October, the state-run China Daily reports. He now drives a $26,360 Toyota, it says.
The volatile nature of the garlic market is typical of a cyclical product, says Chen Shuwei, an analyst at Beijing Orient Agribusiness Consultants. “There is a lot of money in China, but private businessmen don’t have many avenues for investment as state-owned companies control many large industries. But it’s easy for them to enter a sector like garlic and make some short-term profits.
“Their money may head to another product soon,” he warns.
While Beijing closely watches potential bubbles in key industries such as real estate, the pricey bulb remains a minor concern, Chen says.
“The price of garlic is rising, and Chinese people need it for their daily cooking, but the rise does not have a big impact on household consumption, and matters less than key crops like corn and wheat,” he says.
Sticker shock
The soaring costs still raise eyebrows on China’s streets. “How can it be this expensive?” asks Zhao Wenjing, a Beijing nurse buying garlic Monday. “I haven’t cooked for a long time, but I heard some doctors said it could prevent H1N1, so I came to buy some, although I don’t actually like the smell,” says Zhao, 26.
Unlike some Chinese business booms, the garlic surge might help American businesses, at least in the short term. Garlic growers in the USA have long complained about their Chinese competition.
“Chinese garlic’s major price bump is a boon for California growers looking to recoup business that has been lost to cheaper Chinese garlic,” reads a blog post on the site of a major California grower.
Contributing: Oren Dorell in McLean, Va.