Garlic run smells like speculative bubble

Nov. 26, 2009 at 3:21 PM
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JINAN, China, Nov. 26 (UPI) -- Garlic is China's best-performing asset, 15 times more valuable than in March, in part because people think it cures swine flu, analysts say.

In Shandong's Jinxiang county, China's largest garlic production and trading base, the price has jumped forty-fold, market watchers say.

The China Daily reported last week a high school in the eastern city of Hangzhou bought more than 400 pounds of garlic and made students eat it at lunch every day to stay healthy.

While residents of north China are known to eat garlic to ward off flu -- and some Taoists believe garlic enhances the vital life energy, or chi energy -- China's Commerce Ministry posted an article on its Web site quoting medical experts as saying garlic does not replace a flu shot.

So why the big garlic bull run?

Financial services provider Morgan Stanley suggested massive bank lending intended to stimulate China's economy has led to speculation.

This came after farmers drastically slashed their planting areas after prices collapsed during the financial crisis, leading to a demand-supply imbalance, the official Nanfang Daily quoted a wholesale trader as saying.

Whatever the real story behind the price increases, growers in California, America's garlic heartland, will be pleased, the Financial Times suggested. For years, despite tariffs, the U.S. market has found it difficult to compete with China's cheap garlic.

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