A total of 200,000 tons of edible oil reserves will be auctioned
to curb price hikes during the week-long National Day holidays,
officials have announced.
The move is the latest effort by food and price watchdogs to
rein in inflation, which is largely driven by soaring grain, pork
and edible oil prices.
The consumer price index, a key gauge of inflation, hit 6.5
percent last month, the highest in a decade. Edible oil prices rose
about 30 percent.
"The auction will ease inflation and the market shortage," said
Chen Lina, an analyst with Beijing Orient Agribusiness Consultant
Ltd.
The auction - of 178,000 tons of soybean oil and 22,000 tons of
rapeseed soil stored in reserve in 11 provinces - will take place
simultaneously in Anhui, Tianjin and Guangdong, with online
transactions permitted.
No company can buy more than 5,000 tons, the State Grain
Administration said in a notice posted on its website on
Tuesday.
But given the annual per capita edible oil consumption of 18 kg,
experts said long-term incentives are needed to improve the bleak
situation of soybean and rapeseed production, which has suffered
constant declines due to low profit margins and competition from
the global market.
The State Council issued guidelines on Monday to ease the
situation.
According to the guidelines:
Oilseed production will be revived by offering subsidies and
tightening controls over edible oil exports.
Soybean production acreage that enjoys subsidies will be
expanded to 2.67 million hectares from 700,000 hectares.
Rapeseed farmers are entitled to 150 yuan ($19) subsidy per
hectare.
By the end of 2010, oilseed production area will increase by 6
percent, and total production by 14 percent.
However, given the higher profit in wheat production, farmers
might be reluctant to switch to rapeseeds, according to Chen.
Due to shrinking area and bad weather, rapeseed production is
expected to drop by 5 percent from last year to hit 12 million
tons; and soybean production to hit the lowest level in a decade at
14.4 million tons this year.
The State Council announced last week that the import duty on
soybeans would be slashed from 3 percent to 1 percent to encourage
oil production.
Last month, the government released pork reserves in the market
to "ensure that the major food prices will remain stable during the
rest of the year".
(China Daily September 27, 2007)
