The Chinese government rigorously restricts large gatherings of people to limit the spread of the corona virus. Large ginger markets have temporarily halted their operations and most ginger processing factories have closed down for now. In the long term the trade will recover, but what are the effects of this epidemic on short-term supply and demand trends?
1. The supply volume of ginger seeds is shrinking, which will have an effect on ginger supply once trade resumes. Farmers will find purchasing ginger seeds more difficult. Traffic is currently limited as many roads are blocked. Farmers have no way of going out to purchase suitable ginger seeds, but the demand for ginger seeds still remains and will only grow stronger as time passes. When the ginger seed market resumes trade operations, the demand volume will be huge. Not only will many farmers have to buy second-grade ginger seeds that will result in poor quality ginger, but their production volume will decline as well. The supply volume of ginger will significantly decline in the short term.
In addition, the surface area devoted to Chinese ginger plantation continuously expanded in the last two years. In 2019 the production volume per hectare declined, which reduced market supply and improved the market price. Farmers continued to expand the surface area devoted to ginger plantation because the market prospects looked good. Now, however, if farmers are unable to purchase a sufficient amount of good-quality ginger seeds, then the expansion of surface area devoted to ginger plantation could be affected by this epidemic.
2. Traders with stock in storage could adopt a hesitant attitude to see how the market develops. In the few days after New Year, when the markets were still open, the market in Anqiu sold a small volume of ginger from cold storage. Since the production volume per hectare declined, traders with stock in storage assume market conditions will improve. They are therefore waiting for the price to rise before they are willing to sell their ginger from storage. The corona virus may disrupt the plans of some of these traders. Traders recently began selling small volumes of ginger from cold storage, and a growing number of traders with stock in storage is looking for buyers.
The current conditions in the Chinese ginger industry, however, clearly show that this production season there is a relatively short period of time in which traders are able to purchase ginger and stock up their warehouses. Furthermore, the price of ginger when it enters the warehouse is quite high. The cost price of storage itself further raises the retail price. And the outbreak of the corona virus severely disrupts trade. Still, a majority of traders with stock in storage continues to wait and see how the market will develop. They are still optimistic about market developments later in the season. The short-term disruptions have not resulted in panic and traders are not suddenly emptying their warehouses to avoid disaster later in the season.