China will extend price controls in place since December on retail cooking oil and may offer more soya and rapeseed oil from state stocks, a move which could slow soya imports by the world's top buyer, industry sources said on Friday. The price controls were used to keep vegoil prices at November 2010 levels for four months as Beijing battled rising inflation, and led some crushers to cancel US soya cargoes and defer shipment earlier in the year.
A feedmill executive, who declined to be named, said his firm has been notified of the price cap extension, but has no word on any new sales from state stocks. Beijing in January offered a total of 350,000 tonnes of soyabeans and 450,000 tonnes of rapeseed oil to crushers at lower-than-market prices, and industry players who also heard of the price cap extension are looking at the possibility of a new round of reserve stock sales. "We could not confirm any fresh cancellations, but it could happen surely as crushers cannot make money from imported cargoes," an executive from one of the country's major soya crushers told Reuters.
Analysts said depending on Beijing's policy moves, China's soya imports in April could reach about 4 million tonnes, almost flat from the same month a year ago, when imports surged 13 percent. "Soya imports normally peak from April to June, but this year, we do not expect imports to grow so much as that last year. Crushing margins are much lower than year-ago period," said Ma Xiaolei, an analyst with Maike Futures.
China's soya imports in March were estimated at 3.9 million tonnes, according to the forecast by the Ministry of Commerce, flat from a year-ago period. Soya imports in February fell to the lowest since November 2008. Since the end of November, Chicago Board of Trade soyabean prices have jumped by about 11 percent on concerns of tight global supplies, making import costs for Chinese crushers nearly prohibitive.
Crushers are now estimated to be losing 300 to 400 yuan ($45.85 - $61.14) for processing imported soyabeans into soya meal and soya oil, leading to about half of the production in the Shandong area being shut down, the feedmill official said.
"The government is trying to maintain a steady market now and is being helped by poor performance in livestock breeding, which reduces the needs for imports," said the official. Animal feed demand has not picked up as usual during this time of the year because of frequent outbreaks of poultry and pig diseases, leading to mounting stocks of soya meal, a feed ingredient and also a major product of soya crushing, he said.
"Some chicken feed makers in Guangdong have reduced output by 20 percent from a year-ago period, the cut may vary from mill to mill, but overall output shows declines from a year-ago period," said Gao Chunlai, an analyst with a feed industry consulting firm.