January 24, 2011

China's soy crush margins suffers losses in early 2010

China reduced its domestic oilseed production while soy crush margins saw losses in the first half of 2010, according to the 'China's Vegoils & Oilseeds Market Analysis and Forecast Report (2010-2011)'.

China's vegetable oil industry mainly showed the following characteristics and changes in 2010:

The Government policies continued to make a great impact on the market as it encouraged and subsidized oilseed production. The policies of soy, rapeseed purchasing and vegoil storage selling continued to be implemented in order to stabilize the market. Rapeseed and soyoil imports were restricted.

Domestic oilseed production reduced, and the dependence on foreign vegetable oil increased.

The production of rapeseed and cottonseed dropped, but the output of soy, peanut and sunflower remained almost same with the previous year. Most of rapeseed production was purchased by the State Reserve, and domestic oilseed supply reduced. Soy and rapeoil imports increased significantly, resulting in the dependence on foreign vegetable oil up to 70%.

Soy crush had increased substantially, while the supply and demand kept balance. Domestic oilseed supply was tight, but soy imports and crush substantially increased, vegoil production and consumption continuously grew, the supply and demand almost kept balance.

Oilseed crushing margins were better in the second half of the year, while the capacity of vegoils kept on increasing. Soy crush margins suffered losses in the first half of 2010, but made profits in the second half. Rapeseed crushing margins were fairly good. New projects of soyoil, rapoil and palm oil continued to appear, and those of other vegoils such as peanut oil, corn oil and camellia oil, increased significantly.

Vegetable oil prices rose largely since Mid-July. In 2011, the government policies on purchasing, storage and import, will continue to have critical impact on the vegoil market. Main development trends are expected as follows: the supply of domestic oilseed supply rallies; the total oil and oilseed imports continue to increase; the vegoil market is balance between supply and demand, and the inventory increases; the vegoil producing capacity continues to expand, with optimization of product structure; the prices of oils and oilseeds fall at first and pick up again in the second half of 2011, higher than the average of 2010.