20/11/2007 (Bloomberg) - China, the world's biggest vegetable oil consumer, will need to import more soybeans, palm oil and other oilseed products to meet growing demand after local farmers reduced plantings, a state-owned grain trader said.

China's imports will account for 45 percent of international trade in soybeans by volume during the year to Sept. 30, 2008, Wang Yinji, deputy general manager of Cofco Ltd., said in remarks prepared for a speech today in Guangzhou. Vegetable oil shipments will account for about a fifth of such trade in the period.

``China's vegetable oil consumption will rapidly rise for a few years,'' because per capita consumption of 17 kilograms a year is below the world average, Wang said. That compares with 25 kilograms in Taiwan, which has a similar diet structure, and nearly 40 kilograms in the U.S., he said.

Chinese buying helped push up the price of soybeans traded in Chicago by 56 percent this year to touch a 19-year high this month, and aided palm oil's 49 percent advance to a record in Malaysia. Demand for vegetable oil in China, the world's most populous nation, grew 6.8 percent a year for the past 12 years, three times faster than in the U.S., Wang said.

Soybeans will continue to be the leading source of vegetable oil for China, accounting for 41 percent of total supply by 2010- 11, up from 37 percent now, Wang said. Palm oil will jump to 31 percent of the total from 21 percent, he said.

The gap between annual domestic output and demand for vegetable oils will expand by 2 million metric tons in the year through September 2011, compared with the 12 months ended Sept. 30 this year, Wang said.

Economic Growth
Economic growth tends to increase vegetable oil consumption because improved living standards encourage people to eat more oil-rich foods, Wang said. China's gross domestic product per capita is set to double by 2010, compared with 2000, he said.

Soybean, palm oil and rapeseed oil will make up 88 percent of China's total supply, compared with 78 percent, according to Wang. Rapeseed oil's market share is set to decline to 16 percent from 20 percent, he said.

China's domestic supply of oilseeds ``sharply fell'' this year because the area planted declined, Wang said. Soybean output dropped 20 percent from a year ago and rapeseed fell 25 percent, Wang said without providing detailed figures.

The government this year introduced policies, including boosting subsidies, to restore plantings, he said. The level of output may recover to the level in 2003 and rise by 3 percent every year by 2010, while the rate of increase will not be enough to stem the rising imports, he said.

China's vegetable oil imports rose 27 percent in the first 10 months of this year from a year earlier, according to customs data. Imports of vegetable oil were 7 million tons in January-October. Imports of soybeans grew 4.5 percent in the first 10 months to 24.5 million tons.