Friday, November 27, 2009

chinese garlic speculators cash in on swine flu fears

WaPo | Garlic prices are hitting record highs in China, the world's biggest producer of the pungent bulbs, amid reports of a speculative bubble in the market even as people rush to buy it as a putative cure for swine flu.

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

Wholesale garlic prices in Beijing are now 15 times as high as in March, and still rising.

Jerry Lou, a Morgan Stanley China strategist who has researched the opaque market here, said speculators -- fueled by the abundant liquidity sloshing around China -- have moved into the small market and strategically driven up prices.

"You need a warehouse, a lot of cash and a few trucks. That's how it works," Lou said, describing garlic speculators' tools of the trade. "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."

Lou said garlic wholesalers told him that gangs that had amassed cash and credit from dealing property and stocks in other parts of the country had chosen the garlic market as their latest ruse.