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As Supply Pressure Increased Gradually, Bulk Vegetable Oil Prices to Drop

China Agriculture Report By CnAgri2017-09-11 11:38:13China Agriculture Report Print Since August, the domestic soybean oil and rapeseed oil prices had gone up sharply. The average monthly prices were 6,162 RMB/MT and 6,609 RMB/MT respectively, up sharply by 153 RMB/MT and 348 RMB/MT from July. 
The cause for the increase of vegetable oil prices was mainly the follow: due to the impact of the environmental protection inspection, in August, the overall operating rate of Shandong’s oil mills dropped and the supplies severely tightened. As a result, the surrounding areas such as North China and Eastern China’s soybean oil prices went up; as the cultivation area continued to drop sharply, at present, the rapeseed producing areas are basically out of stock. Moreover, as the rapeseed import volume remained low, the growth of rapeseed oil prices were higher than other vegetable oil varieties.  
According to the demand and supply changes of the vegetable oil varieties in later period, we think:
The prices of bulk vegetable oil varieties such as soybean oil and palm oil would drop. At present, the commercial inventory of the domestic soybean oil is over 1.4 million tons, up 22% year on year. A tight supply was found due that most oil plants suspended production except Rizhao. As the domestic oil mills’ operating rate would increase significantly in September, the soybean oil supply would continue to increase; In August and September, the palm oil import volume would pick up to over 500,000 tons but little change would be found in the domestic demands. The palm oil inventory would gradually increase, as a result, a long-term price pressure would occur.  
In addition, because domestic rapeseed supply was limited, major producers’ output decreased, China’s imports tend to decline. The major importers are Guangdong, Guangxi, Fujian whose rapeseed inventories had fallen to 350,000 tons, the lowest level in nearly four years, so rapeseed oil price is likely to remain strong to a certain extent. 

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