Jul. 9, 2007 (China Knowledge) – The drop in domestic colza plantation areas and the concomitant rise in foreign ownership of local colza plantation land is threatening the cooking oil industry in China. 

Chu Xuxuan, an official of the Chinese Cereals and Oil Association (CCOA) said that the amount of land used to produce colza has been declining by 10% yearly to the 5.7 million hectares in 2006. Chinese farmers are reluctant to grow colza as their prices have been dropping.

Colza prices hiked 50% to 60% in June due to the shortage in its supply. Guangming Grain and Oil Industries Co, which is based in Anhui, is reported to have bought only 6,000 tons of colza in 2006 when the company has a productive capacity of 60,000 tons annually. However, the prices of domestic colza are expected to drop with increasing amount of imports.

Imported colza usually contains more oil and is generally cheaper. In the short duration of the first four months this year, the amount of rapeseed oil and colza that were imported had sky rocketed. China imported 101,721 tons of rapeseed oil in the first quarter this year, which is also 55 times of the amount that imported in 2006. Import expenditure has also climbed dramatically from US$1million to US$76 million. 

According to Wang Guangming, the chairman of Guangming Grain and Oil Industries Co., of the 70 companies in Anhui that used to process colza, only 10 remain.  Furthermore, he pointed out that foreign companies have been gaining a greater share of the Chinese market as a large majority of all the companies in coastal regions are owned or funded by foreign capital. In addition, their advantage in better raw materials and lower costs give them greater clout to dictate prices in the industry.

Hence, Wang cautioned that 70% of the remaining domestic companies would be forced to close down their colza-processing units if nothing is done to help these companies gain competitive advantage.