Forget gold and silver, invest in garlic

Forget gold and silver, invest in garlic
Thanks to a belief in its flu-repellent powers, garlic traders are on course to get stinking rich this year

By Andy McSmith
Friday November 27 2009

If you want to get rich in China, the way to do it this year is to buy and sell garlic. The Chinese have always had a taste for the bulb vegetable that makes your breath smell but now there has been an incredible surge in its price, which makes the property boom look static by comparison. Garlic has been a better investment this year than gold or silver.

But why? Garlic, surely, is nothing but a smelly, unromantic little vegetable which nobody eats in any great quantity unless they want to lose all their friends. So why should the garlic traders of Jinxiang province, the garlic-producing heartland of China, be stinking rich this year?

One reason is a belief that it can keep you safe from swine flu. In north China, chewing garlic to ward off flu and other ailments is an old practice and it is suspected that traders have been encouraging people to believe that it is an effective way to survive the H1N1 epidemic.

The China Daily reported last week that a high school in the city of Hangzhou, in eastern China, had bought 200kg of garlic and is making its unfortunate students eat it for lunch every day for the good of their health.

But the much tastier honeysuckle is reputed to have the same preventive qualities and the price of that has not soared, while the wholesale price of garlic has.

According to the Ministry of Commerce, the average price of a kilogram of the vegetable has risen from 1.60 yuan (15c) in March to 6.14 yuan (60c) now.

In some markets, the price has risen 15-fold, or even 40-fold, according to Jerry Lou, a Morgan Stanley analyst. "You need a warehouse, a lot of cash and a few trucks," Mr Lou told The Washington Post.

"Basically, what you do is try to arrest as much supply as possible, then you bid up the price. Moving garlic from one warehouse to the other, you make millions of dollars."

In China, garlic is big business. The country produces three times more of it than the rest of the world combined, much of it for export.

When wholesale prices balloon, some people make a lot of money, while others can get their fingers burnt if the price drops suddenly. The story has echoes of the great Dutch tulip bubble of 1637, when people went bankrupt because of a false belief that the price of tulip bulbs would go on rising forever.

When the world recession hit last year, Chinese farmers planted less garlic in anticipation of a falling market. According to the specialist garlic website, www.dasuan.cn, the total area under garlic cultivation dropped from 673,670 hectares (1.7 million acres) in 2007 to 370,519 hectares (0.9 million acres) in 2008.

Meanwhile, banks poured cash into the economy, giving speculators an opening to buy up the garlic harvest before it was ripe, store it, and wait for the price to rise.

The Chinese are not the only people to believe in the power of garlic. European folklore has attributed all kinds of healing properties to it, not least its power to repel vampires, used to good effect in Bram Stoker's novel Dracula.

Garlic does, indeed, have the power to kill bacteria, but it is not powerful enough to make a person immune from swine flu. As to whether it makes a vampire scream and run away, you would have to ask Stephanie Meyer.

- Andy McSmith