Tuesday, November 29, 2011

Vegetable Oil Prices Plunge

Commodity prices in China are still subject to the law of gravity. During the first eight months of this year Chinese officials worried about inflation ordered the biggest vegetable oil companies to keep a lid on prices despite strong upward pressure on prices. When the unofficial price controls were lifted in August, prices rose.

Now, just a few months later, vegetable oil prices are falling. The Shandong Commerce News reports that cooking oil prices in supermarkets are falling, some as much as 20 percent.

Mr. Zhao, a shopper in a Jinan supermarket, noticed that cooking oil brands that were rising in price during August and September are now a lot cheaper. Various brands, including Jinlongyu, Hujihua, Longda, and Xiyan, all were running special promotions. The price on a four-liter bottle of Longda peanut oil was cut from 96.8 yuan to 79.9 yuan, a 17% discount.

The reporter found that soybean and corn oils had the biggest price cuts. With the Jan. 1 New Year and the Spring Festival holidays coming up, shoppers were eager to stock up on cheaper oil. Some shoppers were stocking up because they worried that prices might go up again after the holiday period. The display area for soybean oil was mostly cleaned out, with only a few bottles left. A worker in the store said sales were about 30 percent more than before the promotion.

The decline in prices is not just a promotional phenomenon. A wholesaler interviewed by the reporter said falling retail prices reflect a recent decline in wholesale prices. Soybean oil and mixed salad oil have had the biggest declines. The reporter said the declining prices, in turn, reflect declining prices on the international market since about 70% of China's vegetable oil is imported.

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