Food insecurity: Western imports drive cost of cooking oil

(Ecns.cn) -- China continues to step up measures to contain cooking oil prices, but those measures are doing little to calm rising consumer fears of inflation, reports the state-run Oriental Outlook magazine.

Much of the problem stems from China's dependence on imported raw materials to make edible oil.

Droughts in the United States and climate anomalies in Brazil and Argentina have caused brands like Golden Dragon Fish Oil and Fulin Door to increase their prices by 8 to 15 percent.

For more than two decades, the development of its edible oil industry has benefited China's people, relieving them of tiresome duties like carrying bottles to buy oil from workshops.

Yet the growing popularity of cooking oil products in markets has also put consumers under pressure, as prices spin ever more out of control.

Since last month, the National Development and Reform Commission (NDRC), China's top economic planner, has held talks with major domestic edible oil crushers to ensure price stability, urging them to report prices of their products at regular intervals.

It also advised them to avoid raising prices unless absolutely necessary.

The move aims to limit price hikes but it's not helping much, because domestic soybean production is primarily under the control of foreign investors, writes Oriental Outlook.

Nearly 80 percent of the raw materials for domestic soybean production are imported, so price fluctuations in the international market always have a significant impact on China's edible oil industry, says Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences.

China is the leading importer of American-grown soybeans, and soybean oil is the top edible oil in China, so the supply decline in the U.S. has inevitably affected domestic prices, adds Li.

It's bad enough that China has been deprived of its pricing power, but what's even worse is that soybean planting here is far from optimistic, says Wang Xiaoyu, vice secretary-general of the Heilongjiang Soybean Association (HSA).

In 2010, soybean area planted in the northeastern province of Heilongjiang, the country's top soybean producer, was more than 4.3 million hectares. That figure dropped to 3.3 million hectares in 2011, and is predicted to fall to 2.4 million hectares this year, Wang points out.

Heilongjiang has been dedicated to planting non-GM soybeans for decades and continues to stick to the principle of growing natural food, he adds, but the local soybean industry has come under serious threat.

Statistics released by the HSA show that the consumption of soybean oil produced by domestic companies accounts for only about 10 percent of the Chinese market.

Meanwhile, four multinational grain merchants – Archer Daniels Midland (ADM), Bunge, Cargill and Louis Dreyfus – control up to 80 percent of China's raw materials and processing markets for cooking oil, according to Oriental Outlook.

This has already been threatening the country's food security, warns Li Guoxiang.

On August 23, Sinograin Oils Corp, the state stockpile, introduced new blended oils to supplement its soybean and rapeseed products, a move designed to help it gain a larger market share.

When Sinograin introduced the new products it also exposed the ingredient proportion, which was seen as a challenge to other blended oil makers with a superior formula.

According to Oriental Outlook, Sinograin has set an annual sales target of 1.2 million tons of soybean oil in five years. It also plans to ultimately achieve a market position among the top three.

Yet the country is still seeking alternative sources of soybeans from around the world to improve its ability to cope with price fluctuations. Experts point out that the government should introduce special subsidies for soybeans, which will encourage growers to go back to planting them.