August 29, 2011

Chinese soy prices increase on higher demand

China's soy prices rose marginally in the week to Friday (Aug 26), as traders begin to regain some of the confidence they had lost as a result of the government's price controls in hope of a demand increase in the upcoming holidays.

Prices in Heilongjiang, the top producing province, were up about 1% to around RMB3,900/tonne (US$610.23), while import prices at major ports rose 2% to around RMB4,250/tonne (US$665).

Ex-factory prices of soyoil were around RMB10,000/tonne (US$1,564.7) Friday (Aug 26), up 1.5% from a week earlier, while retail prices at major supermarkets rose around 5% in August, traders said.

After Yihai Kerry Group, the Chinese subsidiary of Singapore-based Wilmar International Ltd., announced a 5% price hike in early August, most domestic crushers followed suit.

"Prices will continue to rise between the Mid-Autumn Festival in mid-September and National Day in early October," an edible oil trader said.

Analysts expect the government to restart auctions of rapeseed oil from state reserves around October, as it did last year, to increase market supply.

Meanwhile, the government is expected to loosen control of edible oil prices through the rest of the year, as China's consumer price inflation is believed to have peaked in July. Prices of pork, a large contributor to inflation, are starting to show signs of stabilising.

The National Development and Reform Commission said Tuesday that it would "opportunely" increase market supply of grains and edible oil by releasing state reserves.