5/6/2004 - A 13-member Solvent Extractors' Association of India (SEAI)team went to China at the invitation of China National Vegetable OilAssociation (CNVOA). The visit was sponsored by ministry of commerce ofthe government of India.

The delegation included oilseed crushers, oilcake, rice bran and vegetableoil processors, commodity brokers and technocrats. D P Khandelia,president of SEAI, and G G Patel, deputy leader and past president ofSEAI.

The delegation held meetings with Gao Xiushan, president of CNVOA, and LiuTongzhan, general secretary of the China Feed Industry Association, atBeijing, Harbin, Shanghai, Nantong and Guangzhou between 16 and 25 April.

The Chinese planting area of oilseed had increased in 2003 compared with2002 but production stagnated at the 2002 level. This was because of asmaller groundnut crop in 2003 owing to natural disasters.

According to the official research institute, the total Chinese productionincluded eight oilseeds - soybean, groundnut, rapeseed, cottonseed, sesameseed, sunflower seed, linseed and castor seed. The crop size was 52.7million tons (mnt).

The total oil production in China was about 10mnt, while about 20mnt ofsoybean seed was imported, equivalent to 3.6mnt of soybean oil. China alsoimported 5.5-6mnt of vegetable oil, mainly palm oil and soyaoil. The totalChinese demand for edible oil was approximately 18-19mnt.

Imports of oil and oilseed shot up in 2003. According to data released byChina General Administration of Custom, the total quantity of importedoil, including oil converted from seed, touched 9.58mnt, up 67 per centfrom 2002.

The total import quantity exceeded the promise made by China when itentered the WTO. Soybean oil import was at 1.88mnt, up 116.5 per cent.Palm oil import at 3.22mnt was up 48.7 per cent.

Rapeseed oil import at 0.152 million tons was higher by 94.8 per cent.Soybean imports touched 20.74mnt in 2003 from 11.32mnt in 2002, up 83.3per cent. Export of vegetable oil was 60,000 tons, down 38.7 per cent .Export of oilseed was 0.94 mnt, up 1 per cent.

The delegation noticed three changes in the Chinese vegetable oil market.

First, huge imports of oilseeds and vegetable oils had led to increase ofclosing stocks of goods like oil, oilseed and meal. Industry sourcesestimated the closing stock of soybean to be about 5mnt and of vegetableoil to be around 2mnt. Soybean meal stocks were also high but the levelwas not disclosed.

Secondly, prices appeared to be recovering despite volatility.

Thirdly, new plants were coming up and old processing units were beingexpanded. This has led to a rise in investments in the sector. However,average capacity utilisation of processing units was less than 50 percent.

In addition, there existed adequate scope for setting up joint venturesand units to process rice bran and possibility of transfer of know-how toupgrade medium-size solvent extraction plants, the Indian delegation thatrecently visited China has concluded.

The delegation said the Chinese government was concerned about thestagnant crop size, including the oilseeds crop. To motivate farmers, theChinese government was proposing to abolish income-tax on farming. It hadrecently announced subsidy of 150 yuan (US$ 18) per hectare to encouragefarmers to switch over from vegetable and fruit to soybean.

Till 1995, China imported oil and oil meal and was the largest importer ofedible oil. In the last five years, Chian switched from importing oil andmeals to import of oilseeds. Restructuring of the sector was taken upthrough creation of processing capacity along coastal areas. This led toclosure of units in the interior areas.

According to trade estimates, Chinese per capita consumption of edible oilwas 13-15 kg. The official population figure for of China was 1.27billion.

Rapid economic growth in China was expected to lead to shortages. Incontrast, India was expected to be a resource surplus country. TheChinese would prefer to have collaborative relationship with India ratherthan a competitive one, the delegation members said in a press conference.