Tuesday, November 15, 2016

China Property Speculators Pile Into Garlic

It seems as though the Chinese garlic market has some periodicity to it and may have a tradable anomaly or two. Links below.
From Asia Times:

Chinese investors smell profit in garlic
HONG KONG -- China's stock and housing markets may be slowing, but one sector is soaring: garlic. Speculators are once again setting their sights on the vegetable, an essential ingredient in Chinese cooking.

According to a Nov. 9 report from the country's National Bureau of Statistics, the Consumer Price Index in October rose 2.1% from a year earlier. But even the highest growth in six months could not meet Beijing's "around 3%" inflation target for 2016.
Many sectors in the economy are slumping, or experiencing moderate growth at best. The same cannot be said for garlic.

As of Oct. 25, the wholesale price for 500 grams of garlic was 7.24 yuan ($1.06), a 90% jump on the year, according to the National Development and Reform Commission. The retail price surged 68% to 7.89 yuan. Compared with September's growth -- 84% for wholesale and 63% for retail -- the pace is further accelerating.

In China, garlic is planted in October and harvested in May. This year's garlic harvest in Jinxiang County in Shandong Province, the country's major garlic growing area, was 20% less than in normal years due to cold weather, according to reports from the Chinese media outlet Caixin. Experts are concerned that speculators smelling a possible supply plunge are trying to corner the garlic market, the media said.

Smelling profit 
China's garlic market experienced extreme price surges in 2009 to 2010, too. Domestic demand at that time exploded on rumors that the pungent bulb could prevent or even cure the flu, while growers across the country were hit by severe droughts. As speculative money began pouring in, garlic prices soared more than tenfold over a year.

Back then, Chinese authorities were increasing controls on the housing market, imposing tighter regulations on purchases. As a result, speculators began shifting their money from real estate to farm products -- not only garlic but potatoes, mung beans and pu-erh tea leaves as well. The move triggered food bubbles across China....MORE 
And no, that's not the origin of bubble tea.

Nov. 25, 2009
Commodities: "Is China preparing for a vampire attack?"
How the heck did I miss this trade?
[maybe you were preoccupied with all the babbling about the grease/tallow/lard complex? -ed]
July 2010
Chinese Government Intends to Halt Manipulation in the Mung Bean Market
June 2012
Commodities: "Egg, garlic prices surge in China"

And somehow related:
November 2015
"Goldman Sachs on Commodities: Not An Appealing Entry Point"
Agreeing with Goldman makes me nervous, I always wonder what we are missing but here I've gotta say, it's still too early. Too early that is except for legumes in India which seem to be rising due to both structural and cyclical price pressure.
Speaking of Indian legumes, did I ever tell you about the great guar squeeze of 2011-12? Back then men were men and beans were for frackin', not eatin' and.....where was I?...