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China's major edible oil makers urged to stablize prices
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08:22, November 06, 2007

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Executives of China's major edible oil manufacturers and guild leaders were summoned to Beijing on Monday for a closed door meeting at which the government required them to step up production to rein in the soaring market prices.

An official with the National Development and Reform Commission(NDRC) who asked not to be identified said it was understandable for the edible oil processing firms to raise prices as the continuous rise in the cost of raw materials had increased their production costs.

However, the public had responded strongly to the price hikes of edible oils, coming as they did with rapid rises in the prices of other goods, the official said.

Edible oil makers were told to "deepen their sense of social responsibility" and "bear the overall interests of the country in mind".

Incomplete statistics from various regions show prices of domestic edible oils rose by 20 percent from November last year to June as the prices of peanuts and other oil-bearing products had risen.

In eastern Shandong Province, first grade peanut oil has risen by 28.6 percent from 14,000 yuan per ton in April to a record 18,000 yuan per ton. While supermarkets marked down cooking oils to boost sales, people were reportedly standing in long queues. On Oct. 26 in Shanghai, 15 shoppers were injured after people swarmed in a local supermarket to snap up edible oils on sale only five minutes after the store opened.

But the latest weekly market monitoring report by the Ministry of Commerce showed the prices of cooking oils fluctuated only slightly from Oct. 22 to 28, with the prices of peanut oil edging up 0.1 percent from a week earlier, while rapeseed oil was down 0.1 percent, and soybean and blended oils were basically the same.

Wang Hanzhong, director of the Oil Crop Institution of the Chinese Academy of Agricultural Sciences, attributed the price hikes to a shortfall of oil crop output as the acreage under oil crops had dwindled drastically. Major oil crop producer Hubei Province, for example, had found the acreage under rapeseed shrank from 18 million mu to 15 million mu last year. The situations in Sichuan, Anhui and Jiangsu were even worse.

Soaring domestic demand that registered an annual average growth of 8.95 percent from 14.54 million tons in 2001 to 22.35 million tons in 2006, had aggravated the problem, turning China into the world's largest edible oil consumer. Domestic edible oil supply met just 40 percent of domestic demand.

In a statement after the meeting, the NDRC spelled out five requests including the supply of more small-package oil to meet market demand.

Oil processors were not allowed to disturb market order or stoke up fears for price hikes by hoarding raw materials, rigging raw material supply, cutting production or restricting supply.

Price hikes must be kept within reasonable margins and be made when absolutely necessary, it said, adding that oil processors must enhance cost controls, improve management and absorb the costs from raw materials as much as possible.

The NDRC also warned large cooking oil makers not to collude insetting prices or provide short measures or shoddy products.

Under current price conditions, enterprises should transfer part of their interests to the people and cherish their public reputation, it said.

Industrial associations were required to provide guidance to firms, make sure they abide by laws and regulations, admonish enterprises in cases of unfair competition, and keep market supervisors informed of the malpractice.

If the price hikes exceeded the extra production costs, market supervisors would step in, it warned.

Without identifying the participating cooking oil makers, the statement said that representatives from business communities had promised to maintain market order with their actions and contribute to the stabilization of market prices.

China's consumer price index, a key measure of inflation, rose by 6.2 percent in September after hitting an 11-year high of 6.5 percent in August, while food prices jumped by 16.9 percent from January to September over the same period of last year, figures from the National Bureau of Statistics showed.

The Ministry of Agriculture released 11 measures in late September, including rewards to major oil crop planting counties as well as total subsidies of 300 million yuan for soybean cultivation and assistance of one billion yuan for rapeseed cultivation.

The import duty on soy beans was also cut from three percent to one percent. The State Grain Administration released 200,000 tons of state edible oil reserve to meet rising demand prior to the the National Day holiday that fell on Oct. 1.


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