Crops the latest way to strike it rich quick
By Wang Yanlin |
August 11, 2010, Wednesday
|
Print Edition
Print Edition
FIRST there was the stock market bubble and then the property bubble, and now China is trying to cope with a much tastier but equally sinister bubble: garlic and ginger prices.
According to a report from investment bank Morgan Stanley, garlic was the best-performing commodity in China last year. Garlic prices have jumped as much as 40 percent in the past two months alone, and ginger prices have doubled in the past six months.
"An uncertain outlook for housing prices and a very weak performance in the stock markets have led some investors to channel their funds into non-traditional sources," said Sun Lijian, an economics professor at Fudan University.
Supply and demand, the traditional cause of volatile prices in soft commodity markets, certainly underpin part of the current price structures. After two consecutive years of losses amid depressed global demand, many garlic farmers switched to other crops and yields dropped.
Those who persisted in garlic cultivation are now reaping the rewards.
In Shandong Province's Jinxiang County - known as the "land of garlic" - farmers have watched with glee as prices kept rising.
A report in the Jinling Evening News said garlic farmers in Jinxiang are currently selling garlic at 10 yuan (US$1.47) a kilogram, compared with about 6 yuan two months ago. The cost of raising garlic, excluding labor input, is about 3 yuan a kilogram.
Jinxiang grows about 90 percent of the garlic consumed in China and about 80 percent of the world's consumption. Prices there set the scale for prices across China.
But skeptics worry that the farmers are merely pawns in a market being taken over by shadowy profiteers.
"Why does the price hike happen only to a small number of agricultural products?" said Wei Wenhu, a researcher and the deputy editor-in-chief of the China Business Herald. "A simple analysis can help us see there is price manipulation and speculation."
To be sure, agricultural commodity prices can be notoriously boom and bust, causing bubbles and collapses that make fortunes for the smart money but bring woes for farmers.
Garlic isn't the only crop now in a boom cycle. Prices of green beans and most recently ginger have also skyrocketed. In Shanghai's supermarkets, the price of ginger has almost doubled to 15 yuan a kilogram.
The story of green beans is a bit more theatrical. People first attributed its soaring price to the promotion of the cheap food by Zhang Wuben, a "health guru" of traditional Chinese medicine. When the guru's medical background was exposed as a fake in early June, his recipes for healthy living came under fire and green bean prices dived.
Still, the price has been rising again. Green beans are now selling for about 15 yuan a kilogram, compared with 10 yuan one month ago and 20 yuan at the peak of Zhang's popularity.
For some, these soaring vegetable prices are a worry. They are starting to approach the price of some meats in a country whose diet is rich in vegetables.
Produce like garlic and ginger are ideal for market manipulation.
They are grown in relatively few areas, such as Jinxiang County and around small towns in Sichuan and Yunnan provinces. They are also crops that store well for longer periods of time.
Then, too, garlic and ginger aren't considered staple foods like meat or eggs by government price-control watchdogs. It's easy for them to slip under the radar screen.
According to a report from investment bank Morgan Stanley, garlic was the best-performing commodity in China last year. Garlic prices have jumped as much as 40 percent in the past two months alone, and ginger prices have doubled in the past six months.
"An uncertain outlook for housing prices and a very weak performance in the stock markets have led some investors to channel their funds into non-traditional sources," said Sun Lijian, an economics professor at Fudan University.
Supply and demand, the traditional cause of volatile prices in soft commodity markets, certainly underpin part of the current price structures. After two consecutive years of losses amid depressed global demand, many garlic farmers switched to other crops and yields dropped.
Those who persisted in garlic cultivation are now reaping the rewards.
In Shandong Province's Jinxiang County - known as the "land of garlic" - farmers have watched with glee as prices kept rising.
A report in the Jinling Evening News said garlic farmers in Jinxiang are currently selling garlic at 10 yuan (US$1.47) a kilogram, compared with about 6 yuan two months ago. The cost of raising garlic, excluding labor input, is about 3 yuan a kilogram.
Jinxiang grows about 90 percent of the garlic consumed in China and about 80 percent of the world's consumption. Prices there set the scale for prices across China.
But skeptics worry that the farmers are merely pawns in a market being taken over by shadowy profiteers.
"Why does the price hike happen only to a small number of agricultural products?" said Wei Wenhu, a researcher and the deputy editor-in-chief of the China Business Herald. "A simple analysis can help us see there is price manipulation and speculation."
To be sure, agricultural commodity prices can be notoriously boom and bust, causing bubbles and collapses that make fortunes for the smart money but bring woes for farmers.
Garlic isn't the only crop now in a boom cycle. Prices of green beans and most recently ginger have also skyrocketed. In Shanghai's supermarkets, the price of ginger has almost doubled to 15 yuan a kilogram.
The story of green beans is a bit more theatrical. People first attributed its soaring price to the promotion of the cheap food by Zhang Wuben, a "health guru" of traditional Chinese medicine. When the guru's medical background was exposed as a fake in early June, his recipes for healthy living came under fire and green bean prices dived.
Still, the price has been rising again. Green beans are now selling for about 15 yuan a kilogram, compared with 10 yuan one month ago and 20 yuan at the peak of Zhang's popularity.
For some, these soaring vegetable prices are a worry. They are starting to approach the price of some meats in a country whose diet is rich in vegetables.
Produce like garlic and ginger are ideal for market manipulation.
They are grown in relatively few areas, such as Jinxiang County and around small towns in Sichuan and Yunnan provinces. They are also crops that store well for longer periods of time.
Then, too, garlic and ginger aren't considered staple foods like meat or eggs by government price-control watchdogs. It's easy for them to slip under the radar screen.
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