Due to a combination of the Chinese New Year, but more importantly the issues around the current Coronavirus, there is expected to be a gap in Chinese ginger supply throughout the whole of March and longer for countries whose lead time is more extensive, then that of European countries.
“A limited number of factories/processors went back in operation (under Government guidelines) on the 16th February with capacity initially limited due to shortage in labour,” explains Pavel Citan from CITEX International, a global trade house based in London.
“We have spoken to our suppliers in China who said workers had to remain at home due to the Coronavirus. Also under the government guidelines all pack houses and associated infrastructure had to go through a deep clean, prior to their labour force returning back to work.
"All staff are then tested both before and after work. It is also important to note that the Ginger growing area and facilities are in a difference city/province to where the outbreak started in Wuhan, Hubei. Furthermore, all new crop ginger was harvested/stored in October/early November 2019, which was also before the outbreak too.”
In addition, this year’s fresh ginger crop is expected to be down by between 10-20% on last year.
“Prices are already high in the UK and although falling off a bit, they are likely to remain so, until early April.”
In late October/early November last year the company’s dedicated fresh produce division lead by Mr Kuljit Lail visited the Shandong region of China, to learn more about the upcoming season.
“This deeper understanding of the harvest process and its operations has further helped to truly understand the end-to-end supply chain for this key global commodity and the associated cost drivers too. We visited six of our trusted suppliers who have been in business with our team for several years. This supplier base was carefully selected and is currently exporting to a global client base with the UK and Europe being important and strategic avenues.”
At the start of September 2019, Chinese ginger farmers were feeling confident that supplies for 2020 would be plentiful and were in no immediate rush to pick their planted ginger crop, this is partly due to a regional increase in ginger planting of 10% per MU (tonnage achieved per 666km of land), amongst farmers in the key growing region.
However, during the harvest season, poor weather conditions had a negative impact on crop quality with many farmers reporting a 20% decrease in yield per MU, however, others did later acknowledge that the overall yield loss verses 2018 is between 15-20%. Moreover, the simple dynamics of supply and demand will essentially add a levy to ginger export prices for 2020.
The current Coronavirus may even this out, but with farmers/processors losing financially an impact may be seen in the forward price per tonne. The coming weeks will give us a clearer picture, of the challenges facing China with both its export and domestic demand currently falling across their fresh sector.
After visiting China CITEX International compiled a report on the current market situation of Chinese ginger click here to read the full report.