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April 12, 2011

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Price cap on edible oil likely to remain

CHINA is likely to maintain a price cap on edible oil as it continues its fight against inflation, reports said.

"The Chinese government has requested us to hold off on price increases for the time being," Au Ka Soon, a spokesman with Wilmar International, told Bloomberg yesterday.

The Singapore-based agribusiness giant holds about half of the retail cooking oil market in China.

Domestic agriculture firms such as Cofco and Chinatex Corp are also among the cooking oil retailers which were asked to freeze prices, the Wall Street Journal reported yesterday.

The Chinese government last November ordered major edible oil producers in China to maintain low prices until April.

The government then channeled 500,000 tons of reserved cooking oil at low prices to five firms to ease the cost pressure on the companies which have to control prices.

The market expects the government to provide another 800,000 tons of cooking oil at a low price to major oil firms to stabilize supply, but Wilmar and Cofco said they haven't heard about such a move.

Inflation in March is widely expected to exceed 5 percent, while food prices in March may grow 12.3 percent from a year earlier, 1.3 percentage points faster than last month's, according to a report by Shenyin & Wanguo Securities.

But analysts said that the price cap may affect profits of edible oil companies, especially smaller ones.

China's top planning agency, the National Development and Reform Commission, has since late March urged companies in the food, consumer goods, and brewery sectors to control prices.

Companies, including Unilever and Ting Hsin International Group, shelved their plan to raise prices early this month.




 

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