The price of Chinese herbal medicines ＂skyrocketed＂ and the pause button was pressed. Experts called for the establishment of a large-scale reserve mechanism for commonly used Chinese herbal medicines
Our reporter, Yin Gaofeng, He Wangjuan
After a round of sharp price increases, the price of Chinese herbal medicines began to decline.
Kangmei Chinese herbal medicine price index shows that the index has continued to decline since August, especially since the end of October, accelerating the decline. As of November 15, Kangmei Chinese herbal medicine daily price index fell by 3.13% compared with the same period in October.
From the perspective of specific varieties, the prices of Angelica and Codonopsis, which rose sharply in the first half of the year, also began to decline. As of November 15, the price of Angelica and Codonopsis has fallen by 25% since November, while that of Codonopsis has fallen by more than 18%. Looking back, the price of Angelica rose by about 60% in June this year, and the market price exceeded 160 yuan/kg, becoming the highest point of the year.
Why did the "skyrocketing" price of Chinese herbal medicines start to press the "pause button"? According to multiple interviews with reporters from Securities Daily, the decline in the price of Chinese herbal medicines this time is generally believed to be due to factors such as excessive previous increases, falling capital speculation, the listing of new main varieties, and reduced procurement demand from some pharmaceutical merchants.
Why did prices fall?
At the end of July this year, when a reporter from Securities Daily visited the professional market of Chinese herbal medicines in Bozhou, Anhui, a merchant owner of Angelica medicinal materials once told the reporter that according to past practice, June and July are the traditional off-season for Chinese herbal medicines, and the market of Angelica should be able to recover in winter.
But the peak season it was looking forward to has not arrived. According to the reporter of Securities Daily, from the price point of view, the price of Chinese herbal medicines has fallen since August, and began to decline rapidly at the end of October. From the perspective of demand, autumn and winter are originally the peak season for procurement, but this year’s pharmaceutical procurement is not as strong as expected.
In the market’s opinion, the main reason why autumn and winter purchases are lower than expected is that, first, the price increase of medicinal materials was too large in the early stage, and pharmaceutical companies slowed down the procurement pace. Second, the output of most varieties has increased recently, especially some main varieties, such as Angelica, Codonopsis, Aster, Paeony, Forsythia, Jujube seed, etc., have a large number of new products on the market, resulting in an increase in market supply and a decrease in prices. In addition, as the tide of capital speculation ebbed, some middlemen and speculators began to ship, which also led to a decline in the price of Chinese medicinal materials.
Regarding the recent performance of the Chinese herbal medicine market, Zhang Yuefeng, chief analyst of Kangmei Chinese herbal medicine price index, said in an interview with the Securities Daily that those varieties with large production capacity, concentrated output, leverage, capital realization needs, and short cycle can only be sold at a reduced price.
The sharp fluctuations in prices have also caused pressure on downstream distributors. "I want to change careers." A pharmaceutical trader in a medicinal herb market in Xi’an pointed to some medicinal materials in the warehouse and told the Securities Daily reporter that he planned to change careers after dealing with these medicinal materials.
"We lost money this year as a whole, and I feel that the herbal industry is getting more and more difficult to do," the drug dealer told reporters. "The price fluctuated too much, and I accidentally lost the money I earned before." He pointed to Angelica in front of him and said that the goods were purchased at 160 yuan per kilogram at the time, but now the price has dropped to less than 100 yuan.
According to him, for merchants like them at the lower end of the industrial chain, the profit margin is basically no more than 10%. "In the first half of the year, many people in the medicinal materials industry made money, but they were all big players like those in Bozhou. For us small merchants, whether the medicinal materials are skyrocketing or plummeting, it is not a good thing."
"This year, the medicinal herbs industry is making money from those powerful big players, but hoarding a lot of goods will also pressure funds, including various costs and risks," Mr. Zhu, a medicinal herb merchant, told Securities Daily.
"The biggest order this year has sold 10 tons, and I still made money, but it took more than ten years to make it," the owner of the Angelica store in the Bozhou Chinese herbal medicine professional market told reporters.
"Affected by factors such as climate, supply and demand, the price of Chinese herbal medicines will change at different times, but this year the price fluctuations of some varieties have exceeded the normal range, which may be a factor of speculation." Mr. Wang, a merchant in the Chinese herbal medicine market in Xi’an, told reporters. "Among the herbs I operate, Angelica is a typical example. It rises quickly and falls quickly."
"At present, the price of some medicinal materials is still at a high level, and it may fall in the future. For example, Angelica, this year’s new products have already come down, and after drying and processing, they will be listed on a large scale in February and March next year, and the price is bound to come down at that time." Regarding the price trend of traditional Chinese medicinal materials, Mr. Wang analyzed.
But he also said that if the price drops too much, it will also harm the planting process, and a reasonable price should be 50 to 60 yuan per kilogram.
Who are the price fluctuations hurting?
"In the first half of this year, almost all Chinese herbal medicines were increasing in price. This is the first time I have encountered this situation in this industry for so many years." Several merchants interviewed expressed similar feelings.
In the first half of this year, He Zihua, director of the Chinese herbal medicine industry office of Hanzhong Agriculture and Rural Affairs Bureau, organized a research team to go deep into Hanzhong’s Chenggu, Liuba, Ningqiang, Foping and other Chinese herbal medicine production areas to understand the situation. In He Zihua’s view, the abnormal fluctuations in the industrial supply chain will directly and indirectly have an adverse impact on the sustainable development of the Chinese medicine industry to a certain extent.
An industry insider told the Securities Daily reporter that for traditional Chinese medicine companies, in the context of rising prices of medicinal materials, costs are rising, but profits are declining. From the perspective of promoting the healthy development of the traditional Chinese medicine industry, how to coordinate the interests of all links in the industrial chain is a problem that needs to be faced at present.
"From another perspective, if the profits of pharmaceutical manufacturers decline, it may affect the enthusiasm of enterprises. And the decline in the price of Chinese herbal medicines will inevitably affect the enthusiasm of growers, which is also unfavorable to the development of the traditional Chinese medicine industry," the above-mentioned person said.
In the opinion of Chen Xingwen, CEO of Kurosaki Capital, the price fluctuation of Chinese herbal medicines has been relatively large in recent years, especially since this year. This abnormal price fluctuation has brought certain adverse effects to all links in the upstream and downstream of the Chinese herbal medicine industry chain. In particular, the short-term surge in the price of Chinese herbal medicines has pushed up the cost of raw materials for enterprises. At the same time, it is difficult for pharmaceutical companies to quickly pass on the price increase to end point consumers, which further exacerbates the difficulties of pharmaceutical companies.
From the end point of use, Chen Xingwen said that the rise in the price of Chinese herbal medicines will eventually be transmitted to the end point market, which may make patients face the situation of doubling the price of medicines, increase their economic burden, and finally cause some people to give up or reduce the use of Chinese herbal medicines.
Zhang Yuefeng also said that the current high price of medicinal materials has made patients call "unaffordable", resulting in slow consumption of medicinal and edible traditional Chinese medicine, forming a relatively surplus situation.
How can we promote the healthy development of the industry?
How to curb excessive price fluctuations and promote the healthy development of the traditional Chinese medicine industry?
Chen Xingwen said that it is crucial to establish a stable market regulation mechanism. For example, it is possible to explore the establishment of a reserve mechanism for large quantities of commonly used Chinese herbal medicines to hedge against market volatility risks and stabilize market supply.
At the planting end, promoting standardization and large-scale cultivation is also a key measure to reduce the impact of price fluctuations. Chen Xingwen believes that by promoting standardized cultivation and large-scale production, the quality and yield of medicinal materials can be improved, and price fluctuations caused by supply and demand imbalances can be reduced.
In fact, according to the Securities Daily reporter, in order to reduce the impact of market price fluctuations, many listed pharmaceutical companies are actively deploying Chinese herbal medicine planting bases.
In addition, establish a data platform to collect and analyze relevant information on bulk medicinal materials, including climate change, planting costs, market demand, etc., and issue timely warnings to guide farmers and distributors to plan planting and inventory rationally to avoid price fluctuations caused by changes in supply and demand.
He Zihua suggested to establish a reserve model of Chinese herbal medicines, organize relevant experts to evaluate the reserve varieties of Chinese herbal medicines and designated reserve enterprises and cooperatives, determine the catalogue of reserve varieties of Chinese herbal medicines and the list of reserve enterprises and cooperatives, and introduce the maintenance technology of Chinese herbal medicines. Through the reserve of Chinese herbal medicines to carry out "abundant storage and underreplenishment", balance the market supply and demand requirements, and avoid abnormal price growth.
Zhang Yuefeng suggested that enterprises and governments coordinate to introduce a cost insurance mechanism and actively explore the establishment of a large-scale reserve mechanism for commonly used Chinese herbal medicines to hedge against market fluctuations.
In his opinion, the policy of centralized procurement of traditional Chinese medicine forces production enterprises to constantly focus on the source, strengthen the comprehensive market as an information connection point and adjustment point, and reduce middlemen. "Enterprise + base + cooperative planting" will become the mainstream, and will also improve the level of closed-loop traceability of traditional Chinese medicine information, forming a benign and healthy development.