April 10, 2009

China may buy about three million tonnes of the country's new rapeseed crop to boost farming income, according to traders.

China will make room for the purchase by selling some of its 200,000 tonnes of rapeseed oil from its current stockpile, said the traders, adding that the plan is being considered and nothing has been finalised.

The government has engaged in state grain purchases since last year as it tried to support prices and prevent further price falls. State buying could lift prices of rapeseed oil, spurring demand for imports of other oilseeds.

China's state reserve has already bought 1.7-1.8 million tonnes of old-crop rapeseed since the fourth quarter last year, and further purchases may help reduce supply pressure and protect farmers' interests, said Tommy Xiao, an oilseed analyst at Shanghai JC Intelligence Co.

Xiao said it is in line with the market expectations amid other stockpiling activities in the agricultural market, and that China's rapeseed production is forecast to increase 10 percent to 13 million tonnes this year.

China's Hubei province, the country's top rapeseed grower, may produce a record amount of the crop this year after it boosted planting, said the China National Grain and Oils Information Centre (CNGOIC) on March 9.

While government stockpiling of soy and rapeseed helped boost imports this year, continued slowing growth in domestic consumption may still reduce next year's oilseed imports, said CNGOIC director Cao Zhi.

A trader said China's rapeseed imports could increase as much as three million tonnes in the year ending May, compared with 900,000 tonnes in the previous year.

Some traders, however, doubted that the government will continue its stockpiling campaign.