China Behind Garlic Price Bubble; Climbing Faster Than Gold

The price of garlic in China has nearly quadrupled since March. It is climbing faster than the price of gold and faster than Chinese stocks.

The trigger for the bull run may have been the idea that the potent bulb can ward off H1N1 swine flu, according to a Morgan Stanley report.

The China Daily reported last week that a high school in Hangzhou, a prosperous city in eastern China, had bought 200 kg of garlic and forced students to eat it every day for lunch to stay healthy.

"I don't know about H1N1, but it can prevent ordinary colds," Zhang Ping, 74, told Reuters at a vegetable market in Beijing. "Take me. I've not had cold for many years and every year I buy several dozen pounds of garlic."

On the other hand, maybe Chinese oligarchs are behind the move.

China Business News said coal mine bosses -- who are often depicted as being both extremely rich and nefarious speculators -- have been playing the garlic market, hoarding bulbs and hauling them between storehouses.

Garlic prices were extremely low last year, convincing many farmers that it was not worth planting the crop again, a wholesale trader was quoted as saying in the Nanfang Daily. Farmers cut back garlic planting by 50%. Thus, a great opportunity arose to attempt to corner the market.

Nevertheless, you only see these types of attempts to corner a market when a lot of money is being printed to support the acquisition binge.

Morgan Stanley used the garlic price surge as a case study of the asset price appreciation going on in China right now.

In some parts of Shandong province, the wholesale price of garlic is up as much as 40-fold.

"Too much liquidity in any market can lead to speculation," Morgan Stanley analyst Jerry Lou said in a research note this week. "The most recent evidence of asset speculation in China's commodity markets has been for garlic."

The liquidity, of course, is caused by China's continued printing of Chinese money to prop up the dollar. Sometimes this money pumping can go on for years, but when it stops watch out below.

Naturally, the climb in price is not limited to China, as trade will bring about something of a global price. Here in the states, I found this comment at GardenWeb.com, which was made in early August:

I am wondering whats up with garlic this season?? How are the prices around the country? I am experiencing very high prices at the wholesale auctions, 2 weeks ago I was getting $36 per peck,that's $180 per bushel. this past Tuesday I received $45 per peck; I am taking a bunch more tomorrow and hope the prices are at least as good as Tuesday. I wonder what is driving the prices, no California or Chinese on the market yet?? I must say i am presenting some very nice garlics but even the cull types are fetching 3-4 bucks per quart, tiny ugly stuff, some not at all well presented or even cleaned with the stalks still on them are doing ok too..