A new economic stimulus policy implemented by the government of China is expected to have positive repercussions for U.S. garlic producers over the next year.
Jim Provost, president of I Love Produce LLC in Kelton, PA, characterized the situation by saying, "We are on the cusp of something historic. The prices [for Chinese peeled garlic] are at an historic high."
According to Mr. Provost, the price per 20-pound box of Chinese peeled garlic was $8 a month ago. "Now it's selling for $18 a box," he told The Produce News June 23. "As [the price of] Chinese goes up, it's getting closer to the bottom line of California." As a result, he is expecting higher-than- normal pricing for domestic peeled garlic this season.
John Duffus, sales director for The Garlic Co. in Bakersfield, CA, said that the continued narrowing of the price gap between California and Chinese peeled garlic would open additional marketing opportunities at retail.
"The price-buyers will have an opportunity to buy domestic garlic," he said June 24.
William Christopher, partner at Christopher Ranch LLC in Gilroy, CA, agreed. The Chinese garlic season is finishing as California ramps up production, and the increased price for Chinese product is not a negative. "We are encouraged," he told The Produce News June 24, when a box of Chinese peeled garlic was selling for $16 in Florida. "That's a pretty good indication of what's going on. We will be able to market smaller-cloved garlic to be competitive with Chinese garlic."
Mr. Provost has been in the garlic business for 20 years, and I Love Produce has had a presence in China for the past five years. "Not only do we have expertise in the domestic garlic business, we are the only company that has operations in China," he said. "We're the largest company in the United States that grows garlic in California and imports under our own brand."
China dominates global garlic production. The country produces 12 billion pounds of garlic annually, supplying 66 percent of global demand. During the past two to three years, Mr. Provost said that the U.S. market has been oversupplied, and prices for Chinese garlic have been cheaper when compared to California garlic.
But market dynamics changed in 2009, he said, adding, "Domestic demand in China for all food commodities is increasing. With the decreasing garlic supply, importers are paying more to Chinese farmers. That supply is costing more money. The price is going up each week. Importers are waiting to see if Chinese farmers are going to lower their prices."
I Love Produce, which supplies conventional and organic garlic, works with both domestic and Chinese producers. "Less volume may be a good story to tell for the small farmers working in China," Mr. Provost said "With all our small farmers in California and China, we treat them fairly. We want to see them grow."
The dampening American economy has not affected garlic consumption. "Garlic is a staple," Mr. Provost said. "We see demand steady despite the economic woes of the country."
Mr. Duffus of The Garlic Co. said that the escalating price of Chinese peeled garlic could be attributed in part to the fact that garlic acreage in China has dramatically decreased, due in part to the fact that Chinese farmers were not properly compensated for production, resulting in their decision to reduce planted acreage.
"A lot of farmers have been burned," he told The Produce News. "[As a result], they are demanding to get paid up front at a higher price."
Weather has also played into the equation, Mr. Duffus added, noting, "A dry spring resulted in a smaller crop." He estimated the reduction in total tonnage from China somewhere between 30-50 percent. "A big reduction in the crop affects worldwide prices," he said.
Supplies of Chinese peeled garlic are tightening at a time when California producers are experiencing increased production costs.
"The California water situation continues to make headlines," Mr. Duffus said. Restrictions on use of federal water means growers are dealing with increased costs associated with well pumping.