The garlic roller coaster

I’ve been doing some more work on garlic production and marketing in Thailand. Yesterday I compiled price data for dried garlic from 1984 to the present (the data is available from the Office of Agricultural Economics). I have plotted the price in this graph (click for a larger version). I have also included a long-term trend line and a 12 month moving average.

Garlic roller coaster

As you can see there is an established pattern of price fluctuation with peaks and troughs roughly every four years. Many people have blamed low garlic prices experienced in (some) recent years on the agricultural trade agreement with China. I have marked the date of the agreement came into force on the graph (October 2003). Prices did fall after the agreement, but as the longer-term data shows this was consistent with a well-established pattern. And from the second half of 2005, prices climbed dramatically reaching an unprecedented 58 baht per kilogram in late 2006.

This increase is partly a result of Thai farmers shifting out of garlic production. They were encouraged to do so by the Thaksin government’s subsidy scheme which paid farmers a modest amount (1,500 per rai) to shift from garlic to other crops (especially contract crops). Farmers accepting the subsidy had to agree to permanently abandon garlic production on the relevant plots.

But rising prices are irresistible and many of these farmers have returned to garlic production. In Ban Tiam (the village in northern Thailand where I have been working since 2002) a good number of farmers made excellent profits on garlic in 2006 and 2007. But they, and many other garlic producers, were hurt by the dramatic fall that occurred in 2008. By the time the garlic from the 2007-2008 growing season was ready to be sold, prices had slumped to around 20 baht, or lower. Protesting farmers targeted the agricultural trade agreement with China as the cause of their woes. But it seems more likely that the low prices of 2008 were caused by an increase in domestic garlic cultivation as a result of rising prices. To what extent the longer-term cycle of rising and falling prices is caused by farmers moving in and out of the garlic market is something I will be investigating.

My guess is that prices will be good, improving solidly again in 2010.

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