CORONAVIRUS IN CHINA CAUSED VOLATILITY IN PRICES OF GARLIC/GINGER
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CORONAVIRUS IN CHINA CAUSED VOLATILITY IN PRICES OF GARLIC/GINGER

Lathia Rubber Mfg. Co. Pvt. Ltd

*China is the world's largest exporter for 80% garlic, 47% ginger and 20% chilli

*A fresh supply of garlic from Maharashtra, Rajasthan, Madhya Pradesh and Gujarat from April onwards



The coronavirus outbreak in China and the wider world is expected to push the prices of garlic and ginger. The coronavirus epidemic in China has caused volatility in consumer’s commodity prices, disturbing both supplies and demand. The latest to be flipped are the China wholesale prices of garlic, ginger and chilli. This matters to the wider world because China is the world's largest exporter of these aromatics, responsible for 80% of all garlic in the world, 47% of the ginger market and 20% of the chilli market, according to Chinas commodities data firm.

Though prices of garlic, ginger, chilli and onions have come down in India with supply from Maharashtra, Gujarat and parts of Rajasthan, another essential item of kitchen produce is touching an all-time high price at the start of the year. Traders attributed the rising price of garlic to the poor supply and heavy rainfall which hit the crop and heavily dropped import from China. The price of the garlic has been showing a rising trend since September 2019 when the curtailed supply started from Nasik (Maharashtra), Bhavnagar (Gujarat), Kota (Rajasthan), Jhalawar (Rajasthan) and Bundi (Rajasthan).

Surplus monsoon and extended rains, coupled with favourable climatic conditions, helped boost the production of garlic and ginger impacting the prices. At the wholesale market, the prices of garlic are now down as compared to 20-25 days. Garlic prices have come down by nearly ₹100 a kg from ₹170 to ₹70-80. A fresh supply of garlic, as indicated by the farmers of Maharashtra, Rajasthan, Madhya Pradesh and Gujarat, we will get an adequate supply from April onwards, said a wholesale trader.

India and Germany are two other major exporters of ginger. In the case of garlic, Spain and Argentina are the second and third biggest suppliers respectively. There has been nothing from China since the end of January, said an Indian importer. And it is not yet clear when the warehouses will open again in China. Importers are looking to Spain, Chile or Egypt to fill their stocks. The Spain garlic price increased by 25%, ginger is even worse. There is a major shortage on the European market, he said. We have our own ginger factory in China, but the virus forced us to stay closed after the Chinese New Year. We now only have a limited stock.

Garlic and ginger prices from China have barely changed since before the start of the Covid-19 virus. Price movement in the world is largely driven by the lack of supply. If the effect of coronavirus lasts for long in China, it will have a negative impact on the price and availability of garlic, onion and ginger, but there are opportunities to import these commodities from alternative markets. Even Bangladesh is looking import garlic and ginger from India, Pakistan and Indonesia. India provided 28% ginger to Bangladesh.

(Disclaimer: This analysis is only for educational purpose and is not and must not be construed as investment advice. It is analysis based purely on economic theory and empirical evidence. Readers are requested to kindly consider their own view first, before taking any position.) Date: 19-3-2020

Kotak Commodity Services Ltd

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