How the Coronavirus Outbreak in China May Affect the U.S. Garlic Market

The ongoing outbreak of coronavirus in China may affect garlic shipments into the U.S. and result in a shortage of garlic supplies, which firstly is to push the prices up. But then the question will arise: who will be able to compensate for this shortage and who will benefit from price increases?

Currently, near 30% of the U.S. garlic market is supplied by imports, which amounted to approx. 90K tons. From this amount, China constituted the largest supplier, accounting for 63% of total imports. In terms of domestic consumption, Chinese garlic holds a tangible share of 28% in the U.S market.

According to the report ‘U.S. - Garlic - Market Analysis, Forecast, Size, Trends and Insights' by IndexBox, the revenue of the U.S. garlic market rose 6% in 2018 to $1.1B. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers' margins, which are to be included in the final consumer price). Driven by increasing demand for garlic in the U.S., the market is expected to continue an upward consumption trend over the next decade. Market performance is forecast to expand with an anticipated CAGR of +0.6% for the period from 2018 to 2030 (IndexBox estimates), which is projected to bring the market volume to 348K tons by the end of 2030.

Production in the U.S.

Garlic production in the U.S. stood at 237K tons in 2018, surging by 2.2% against the previous year. The total output volume increased at an average annual rate of +2.2% over the period from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded in certain years. Garlic production peaked in 2018 and is likely to continue its growth in the near future. Garlic output in the U.S. indicated a measured increase, which was largely conditioned by measured growth of the harvested area and a relatively flat trend pattern in yield figures.

Local garlic producers constitute the first-tier challengers to buoy the supply if imports from China plummet. Domestic production currently supplies over 70% of the U.S. market, and the output is growing gradually. Moreover, U.S. manufacturers have already benefited from the rise of the import tariffs implemented by President Trump's administration because this at some extent relaxed the price pressure on the market. This, however, was not enough to provide the industry with strong growth impetus because any rapid expansion of the output is still hampered by tight pressure from cheaper and available imports from China.

Harvested Area in the U.S.

Garlic harvested area in the U.S. totaled 14K ha in 2018, surging by 2.9% against the previous year. The harvested area increased at an average annual rate of +2.9% over the period from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded over the period under review. Over the period under review, the harvested area dedicated to garlic production attained its maximum in 2018 and is likely to see steady growth in the immediate term.

Yield in the U.S.

Average yield of garlic in the U.S. stood at 17 ton per ha in 2018, standing approx. at the previous year. Over the period under review, the garlic yield continues to indicate a relatively flat trend pattern.

Imports into the U.S.

In 2018, approx. 90K tons of garlic were imported into the U.S.; jumping by 4.9% against the previous year. Overall, garlic imports continue to indicate remarkable growth. Over the period under review, garlic imports attained their peak figure in 2018 and are expected to retain its growth in the near future. In value terms, garlic imports stood at $203M (IndexBox estimates) in 2018.

Imports by Country

In 2018, China (57K tons) constituted the largest supplier of garlic to the U.S., accounting for a 63% share of total imports. Moreover, garlic imports from China exceeded the figures recorded by the second-largest supplier, Spain (13K tons), fivefold. Mexico (12K tons) ranked third in terms of total imports with a 13% share.

From 2007 to 2018, the average annual rate of growth in terms of volume from China amounted to -1.9%.

By contrast, imports from Spain posted solid gains over the last decade, and this country may also challenge to supply the market gap if Chinese supplies will drop. Mexico (+3.6% per year) also experienced a tangible increase in terms of imports. Moreover, Peru, Egypt, and Uzbekistan emerge as the most promising supplying countries (IndexBox estimates), as they boast both strong growth in terms of exports and affordable prices.

In value terms, China ($118M) constituted the largest supplier of garlic to the U.S., comprising 58% of total garlic imports. The second position in the ranking was occupied by Spain ($41M), with a 20% share of total imports. It was followed by Mexico, with a 12% share.

Import Prices by Country

The average garlic import price stood at $2,253 per ton in 2018, remaining relatively unchanged against the previous year. Over the period under review, the garlic import price, however, continues to indicate a strong increase. Over the period under review, the average import prices for garlic reached their maximum at $2,537 per ton in 2016; however, from 2017 to 2018, import prices stood at a somewhat lower figure.

Prices varied noticeably by the country of origin; the country with the highest price was Spain ($3,238 per ton), while the price for Mexico ($1,942 per ton) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by Spain, while the prices for the other major suppliers experienced more modest paces of growth.

Source: IndexBox Market Intelligence Platform