Last week I wrote about the relatively long-term fluctuations in the price of garlic. In response to a couple of the comments I have re-calculated the graph using prices adjusted for CPI (with 1984 prices as the base). I am not sure if I have used the best CPI figures available – I used a set that is attributed to the IMF. Once again, I have marked the agricultural trade agreement between Thailand and China with an arrow.
A few comments on the CPI-adjusted graph.
- First, the long term trend (the green line) shows that, in real terms, there has been an incrase in garlic prices since the early 1980s. (In a previous comment I said that my initial calculations had showed no change in real prices – but I had made some errors in preparing the graph.)
- Second, the peak in real garlic prices that occured in 2006/2007 (after the agricultural trade agreement with China) is not as high as the peak that occured in the mid-1990s, but it one of the highest peaks recroded in this data.
- Conversely the trough in real garlic prices that occured in 2008 is not as low as the previous troughs that have occured in 1986, 1990, 1994 and 1998.
I have also received the following comments from Benchaphun Ekasing of Chiang Mai University:
I would like to show you the graph and figures on production and import of garlic 2001-2006 (see below) I have in my file. Production data were from the Office of Agricultural Economics and import data were from the Thai Customs Department. Garlic imports, mainly (90%) from China were reduced from 47.8 thousand ton in 2005 to 28.99 thousand ton in 2006. This was coupled by a fall in domestic production which was reduced from 107 thousand ton in 2005 to 81 thousand ton in 2006. Some 45 thousand ton or nearly a third of use was absent in 2006 explaining price hike. Since 2003, garlic imports have constituted about a third of total use in Thailand, while imports were negligible before 2001. The fluctuation in imports since 2003, in my opinion, explains much of the garlic price variations – so I am not convinced about your theory of garlic roller coaster, at least since 2002-3 because things have not been the same for garlic since the 2003 Thai-Chinese FTA. I nevertheless don’t know why in 2006 there was a reduction in garlic imports from China when domestic production was also reduced through government policies.
Thanks very much Benchaphun! Does anyone have any thoughts on why imports dropped so much in 2006?
1 response so far ↓
1 hrk // Jul 28, 2009 at 2:25 am
Garlic is a basic ingredient for most dishes in Thailand. In fact, like rice and chillies it can be taken as basic food. This limits the elasticity of consumption. We can therefore assume that the consumption of garlic in Thailand will not show large differences. So, how can the gap in production of garlic available for consumption in 2006 be explained, especially after a steady increase? Did people suddenly stop using garlic or do most grow their own garlic, i.e. subsistence production that does not enter the statistics? Are the statistics simply wrong? Or, does garlic enter the market outside of statistical measurement, or outside of official import data?
I remember that a friend told me in 1980, when I asked about many lorries fully packed with garlic and onions in Northern Thailand that much of it was probably smuggled. I was a bit amused about smuggling garlic in the golden triangle!
During a visit of the Salween I saw several boats coming from Burma packed with dried chillies, another basic food. I doubt that these were going through the official customs channels.
Looking at the data, about 40 to 50 thousands tons might not be accounted for in 2006, a year in which the prices were quite high (especially during the second half). In other words, the shifts in prices might be related to garlic entering the market that is not accounted for in the official statistics.
A further, additional reason might be a degree of cartelization of the garlic market. Such a rather stabile market is always attractive for cartels that generate high incomes from shifts in prices, especially if they can draw on smuggled supplies.
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