August 3, 2004

 

 

China Plans To Tighten Rules On Soybean Oil Imports
 

China will tighten rules to raise the quality of soybean oil imports, disrupting more than $1 billion in shipments from Argentina and Brazil in a bid to help the domestic soybean-processing industry.

 

Starting on October 1, China will impose higher standards by cutting solvent residues in soybean oil imports by about half, according to a report by the China National Grain & Oils Information Center, an affiliate of the State Grain Administration. The average price of China's soybean oil has risen 5.6 percent to RMB 6,550 ($791) a ton in the past month.

 

This will bring limits to a level current suppliers in Brazil and Argentina will not be able to meet without upgrading their processing facilities, said Cao Zhi, an analyst at Oils Information Center.

 

China imported 1.4 million metric tons of soybean oil worth $850 million in the first half of this year. That is more than double shipments of a year earlier, according to customs data. Brazil's soybean oil exports to China surged nearly fourfold to 419,900 tons while Argentina's exports to China more than doubled to 958,200 tons.

 

"There are likely to be some technical problems to overcome when the new standards are introduced, at least initially,'' said Larry Li, head of oilseed trading with Beijing Xinlong Harvest Trade Co., which imports soybean and soybean oil from Brazil. "It's hard to say how much of an impact this will have until more details of the new standards are released.''

 

The change in standards is part of an effort to boost food quality in China, the government report said.

 

The latest ruling may boost demand for competing products such as palm oil as orders for soybean oil decline. Orders for soybean oil have already started to decline because traders do not want to take the risk of shipments being turned back if they arrive after September 30, the grain information center said.

 

China's palm oil imports rose in June, rising 29 percent on year to 386,496 tons, and increased by more than half from 254,441 tons imported in May.

 

Domestic Processors

 

"The government wants to give a boost to the domestic processing industry by raising soybean oil import standards", said Liu Ri, head of research at Liaoning Cifco Futures Co. "That will raise the price of imports and give domestic processors incentive to produce more."

 

Millers in China have the capacity to crush 27.4 million tons of soybeans in 2004, up from 26.4 million tons last year, said Zhang Zhaoxin, an analyst at the country's agriculture ministry, at an oilseed conference in Beijing in April. Soybean processors crush the oilseed to make soymeal for animal feed and soybean oil for cooking.

 

The country's palm oil imports in the first half rose 22 percent to 1.7 million tons, while the total value rose 45 percent to $900 million. Of that, 1.2 million tons came from Malaysia while most of the remainder was from Indonesia.

 

"How much palm oil imports gain depends on how quickly soybean oil exporters in South America can meet the new standards,'' Cao said.