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Home / About Chinese Truffles/ Crazy Prices!!! Why?

From 2001-2007, these years were the golden ages for everyone who was involved in Chinese truffles business. The demands rose year by year, the harvest quantity went up season by season, the quality was at a higher level than now, and the price was very stable and foreseeable – from 2001 to 2007, the export price increased only 10%. Farmers, collectors had decent income, we had reasonably good profit and our customers were happy too. Everybody gained, no one lost.

However, things changed overnight in 2008. Of course, we know it's so-called subprime crisis that first broke out in USA and led to a series of financial crises all around the world – we finally understand what globalization is. Starting from this point, things have been getting worse seasons by season, year by year and up to now, we, an insignificant (compared with the whole world) truffles company in China, are still feeling and trying to absorb the impact.

How do all these crises impact the truffles business? Here is the list and explanations:

1) Outrageous ever-increasing inflation rate in China. From 2001 to 2007, export alone contributes more than 40% of China's yearly 8%-10% GDP growth and 70% of China's export are to USA and Europe. The crises in USA and Europe led to less import of Chinese products and thus damaged China's export and then slowed down China's GDP growth. To ensure China's GDP growth of minimum 8%, Chinese government started 4-trillion-yuan (USD 655 billion) stimulus package and invested money in rails, roads, subways, airports to assure the economic growth. There were much more money supply after that because the money supply in China jumped from 20 trillion yuan in 2008 to more than 100 trillion yuan in 2013! This was a big mistake and since then, the inflation has been totally out of control. In 2007, the export price for 1 kg of fresh truffles >4cm was about 30$/kg. In 2013 (the end of the 212-2013 season), the price was 120$/kg. It's just not truffles, all the products prices, especially the agricultural and forest products in China were 4-5 times higher than in 2007. Another example is the apartments price. In 2007, Kunming's apartments price was average 3000 yuan per square meter. In 2013, it's average 10000 yuan per square meter. See the truffles prices (USD) and export volume (ton) change from 1999-2013 below:
chinesetrufflecrazyprice

2) Much higher labor cost in China. This is definitely the NO.2 factor that keeps pushing the truffles price higher and higher. Starting from 2008, with the tremendous money invested in infrastructure, farmers found that they could easily make about 200 yuan (32$)a day working on the construction sites everywhere whereas from 2001-2007, they could only earn less than 100 yuan. However, their living standard has not improved much because of the high inflation rate. Truffle hunting in China is very labor-intensive and likewise, the truffle price must go up.

3) Ecological environment for truffles deteriorating. The truffles are more difficult to hunt and the harvest quantity decreased from about 300 tons in 2007 in Yunnan and Sichuan to about 120 tons in 2013. Note: the lower harvest quantity is also partly due to the lower overseas demands, and the lower overseas demands are due to higher and higher prices.

4) Euro devaluation. 80% of Chinese truffles are exported to Europe and US dollars are used for all the transactions. In 2008, Euro begun to devaluate against USD. On the other hand, Chinese yuan RMB continues to appreciate against USD – it appreciates 15% against USD from 2008 to 2013. So, the exchange rate change alone makes Chinese truffles 30% to 40% expensive for the European customers.

With all these factors, our export volume in 2013 was only about 40% that in 2007 and we believe this is the case for all the other truffles exporters in China. Due to higher and higher prices, the overseas demands decrease too and then the farmers and collectors are not happy either. It seems that no one gains, everybody loses.

Can the situation be changed? We think so though it may take some time. Chinese government finally realized the serious problems caused by excessive money supply and if the tight monetary policy is enforced, the prices will go down gradually to a reasonable level. In fact, we've seen some effect. At the end of 2013-2014 truffles season, the highest price for 1 kg >4cm truffle is 109$/kg, lower than the last season's 120$/kg, the first time for the last 6 years. Is this the turning point of the trend? We hope so, but not sure.

Another good news is that more attentions have been paid to protect the environment, and to hunt the truffles in a scientific and sustainable way.

After having looked back what happened for the last 6 years, we find that the bright side is that we are still in business. Many got broke and we outlive them and so less competitions.

Our customers have constantly expressed concerns and doubts on ever-increasing prices of Chinese truffles and we couldn't find a serious answer to them until now. We owe the above info to them.

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