May 31, 2007

China's rapeseed prices remain high

Purchase prices of rapeseed in China has started high and fluctuated at a high level since it has been put on the market this year as experts predict prices will remain strong for the rest of the year.

The purchase of rapeseed has began in Sichuan, Guizhou, Yunnan, Chongqing, Hubei, Hunan, Jiangxi, Henan, Anhui, and Jiangsu, with the purchase price hitting record highs from 3,000-3,400 yuan per tonne (US$392-US$445), up 40 percent on year.

To be specific, the purchase price of newly harvested rapeseed is between 3,200-3,600 yuan/tonne in the upper and middle reaches of the Yangtze River, much higher than the 2,500 yuan/tonne price in the same period of 2006.

On May 26, the purchase price of rapeseed started from 3,200 yuan/tonne and rose to 3,600 yuan/tonne in Southwest China; from 3,000 yuan/tonne to 3,500 yuan/tonne in Hubei Province; and from 3,400 yuan/tonne to 3,600 yuan/tonne in Jiangsu Province.

The increase has been attributed to the following factors:

• China's rapeseed output has decreased by a large margin this year, while demand by oil processing factories has increased;

• The market supply of vegetable oil is tight at present;

• Oil processing factories have expanded their processing of rapeseed;

• Driven by profit, more merchants have joined the rank of those purchasing rapeseed this year;

• Prices of agricultural and byproducts have risen; and

• The cost of rapeseed growing and transport has increased.

The biodiesel boom production is also one of the main reasons that boosted rapeseed prices.

Analysts say China will have a hard time modifying the grains high prices which will likely remain in the future. It will It is expected that the rapeseed price may exceed 4,000 yuan/tonne in Southwest China and 3,800 yuan/tonne in Hubei Province.