China Daily reports that edible oil prices are set to go up in China.
(emphasis mine) [my comment]
Edible oil price hike in the offing
By Diao Ying (China Daily)
Updated: 2009-05-19 07:57
Edible oil prices are set to go up in China following the surge in the prices of imported soybean from the US, reflecting how domestic prices are dependent on external factors.
Most of the major edible oil processing companies have announced plans to raise the prices, according to media reports. Yihai Kerry Group, the country's largest edible oil processing company, will increase the price of its products, including the leading brand Arawana, by 10 percent, according to the Beijing News.
People with the company were quoted as saying that the company is under growing pressure as raw material prices have gone up by over 10 percent in the recent weeks.
The company did not respond to inquiries yesterday, but analysts said edible oil prices are indeed increasing in the domestic market due to the high cost of raw materials in the international market.
Soybean futures in the international market have been on the uptrend in the last two months. They rallied to the highest levels in over seven months on May 14, when the May soybean contract rose 12.5 cents to $11.50 a bushel on the Chicago Board of Trade, and the most-active July soybean contract climbed 10.5 cents to $11.28.
The price increase is largely due to fears of a shortage in supplies this year. The shrinking forecasts for Argentina's soy crop due to a damaging drought are expected to keep world importers looking to the US for soy supplies.
A customer shops for cooking oil at a supermarket in Hangzhou, Zhejiang province. CFP
That has led to an increase in cost for domestic oil processing companies as over 80 percent of China's imported soybeans are from the US. The domestic output of soybeans was 16.5 million tons in 2008, and it imported over 37.4 million tons from the US, a record high in history, according to Customs figures.
China imported over 10 million tons of soybeans during the first quarter of 2009, up 30.4 percent over same period last year. Over 80 percent of the imported soybean, or 8.41 million tons, are from the US, up by 44.4 percent.
"We are getting too dependent on the soybean imported from the US. Therefore any price change there will influence the domestic market," said Wang Xiaoyu, a soy products analyst based in the northeastern Heilongjiang province.
Zhu Tingju, who owns a small edible processing business in Shandong province, said the oil prices have risen during the past weeks. “The US market prices play an important role in the domestic oil market. The Chicago Board of Trade is the first thing we look at in the morning," said Zhu.
Edible oil prices were in the limelight when it surged to a historic high last year, mainly due to inflation and rising raw material prices. Some people even stocked several bottles of oil at home for reserves. But analysts say a price surge like that is very unlikely now. [analysts don’t have a clue]
"The price change has a lot to do with the macro economic situation," said Zhang Jianwei, analyst, Haitong Futures. "The price surge last year was mainly due to short supply and inflation, but that will not happen this year." [Last year was speculation. This year prices are going up because of short supply and inflation]
Wang said the government's policy could also be part of the reason for the price increase. The government has been purchasing soybeans from the market at a price much higher than the market price, according to Wang. He said the government is doing this to protect the interests of domestic peasants and encourage them to keep planting. It purchased about 5.53 million tons of soybeans from the domestic market this year.
Wang said the price increase could be good news for the producers in the southern part of the country, who purchased large volumes of soybean when the price was low.
China Daily reports that food inflation in Beijin.
Across China: Beijing
(China Daily)
Updated: 2009-05-25 08:01
Food prices
The Beijing Consumer Price Index (CPI) dropped 1.4 percent in April compared with a year ago, according to statistics released by the Beijing Statistics Bureau.
Food prices, a major gauge of inflation, climbed 2.4 percent in April in Beijing from a year earlier. Prices of vegetables rose 7.4 percent and prices of grain increased 5.4 percent, said the Beijing Statistics Bureau.
[For most Chinese, the change in food prices is what they really care about, as it is what they spend most of their income on.]
China Daily reports that gasoline and diesel prices raised in China.
Gasoline, diesel prices raised
(Xinhua)
Updated: 2009-06-01 09:32
China will raise gasoline and diesel benchmark retail prices by 400 yuan ($58.6) per tonne as of Monday, the National Development and Reform Commission announced Sunday.
The benchmark retail price for gasoline would increase by 7 percent and the price of diesel by 8 percent, said a statement on the NDRC website.
It is the third oil price adjustment this year. On March 25, the NDRC, the country's top economic planner, lifted benchmark retail price of gasoline by 290 yuan per tonne and diesel by 180 yuan per tonne.
The increase was in response to the rising international crude prices under the country's the new fuel pricing mechanism, which took effect January 1, 2009, according to the NDRC.
Under the new mechanism, China's domestic prices are to be "indirectly linked" to global crude prices "in a controlled manner." China would adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4 percent for 22 working days in a row.
NDRC pricing department official Xu Kuning has explained the "indirect link" as "based upon average global crude prices, while taking into account domestic production costs, taxation, and 'appropriate profits' for oil producers."
Crude prices have jumped 30 percent in May, the largest monthly rise since March 1999, boosted by expectations of a global economic recovery later this year.
Light, sweet crude for July delivery rose $1.23, or 1.9 percent, to settle at $66.31 a barrel Friday on the New York Mercantile Exchange.
In Sunday's notice, the NDRC urged the two state-owned oil producers, PetroChina and Sinopec, to increase oil production to meet demand.
It also urged local pricing regulators to strengthen supervision over oil prices and crack down on any price violations.
Asia Steel reports that China steel prices edge up in fifth weekly gain.
Asia Steel-China prices edge up in fifth weekly gain
Thu May 28, 2009 2:49am EDT
* Prices held firm on traders' restocking
* Iron ore deal seen supporting steel prices
* Nippon Steel reportedly plans to raise production in July
By Miyoung Kim
SEOUL, May 28 (Reuters) - Chinese spot steel prices edged up this week for the fifth time in a row as traders continued restocking amid rising prospects of firmer prices after an iron ore deal struck by Asian mills and Rio Tinto as the result of protracted talks.
Prices of China's benchmark hot-rolled coil rose 0.6 percent to 3,465 yuan ($507.5) a tonne, versus 3,443 yuan quoted last week, gaining around 10 percent from a 5-month low hit in late April, data from Metal Bulletin showed.
"Steel inventories held by traders now appear to have returned to normal levels and restocking activity is propping up prices," said a Chinese steel trader.
Macquarie estimated that trader inventory of six major steel products in China had fallen by some 30 percent from a peak in October and November.
"One thing to note is that traders' inventories are declining or stable, despite recent price rises. This is different from January/February this year, when traders' speculative restocking was the sole driver of prices," Macquarie analyst Christina Lee said.
Demand is also held up by expectations that an agreement between miner Rio Tinto (RIO.AX) (RIO.L) and Asian steelmills to cut iron ore prices by a third, less than Asian customers' demand for a reduction of at least 40 percent, may stop further price slides in steel, traders and analysts said.
"We see some potential for Asian HRC (hot-rolled coil) spot prices to rise from recent lows of $400 towards $470 by July, but this will trigger some blast furnaces to be brought back online around the region," CLSA analyst Goeff Boyd said.
Japan's Nippon Steel (5401.T), the world's No.2 steelmaker, will reverse some of its production cuts as early as July on expectations of a recovery in demand from carmakers and others, the Nikkei business daily reported on Thursday, a move that may check the upside of any price recovery. [ID:nBNG389259]
China, which has demanded a bigger price cut, has yet to agree on the benchmark deal, which Japanese and South Korean mills decided to accept, and miners and analysts say China may also accept the deal to avoid being exposed to a volatile spot market.
"We've never heard of any steel mill in China which has said they wouldn't prefer a benchmark, as the spot price is dangerously volatile," Andrew Forrest, the chief executive of Fortescue, Australia's third-largest iron ore miner, said on Thursday. [ID:nSYD393747]
On the Shanghai Futures Exchange, construction steel futures traded almost unchanged from last week, with September rebar futures SRBU9 quoted at 3,618 yuan and September wire rod SWRU9 quoted at 3,512 yuan.
In South Korea, traders, who have delayed purchases to deplete stocks, also increased buying, encouraged by recent price reductions by POSCO (005490.KS) and its smaller rival Dongkuk Steel (001230.KS) in recent weeks.
"End-users' steel inventory remains quite low and traders are preparing for their return to the market and building up stocks," said a trader. ($1=6.827 Yuan) (Reporting by Miyoung Kim; Editing by Clarence Fernandez)
China Daily reports that China building material costs up in April.
China building material costs up in April
By Yu Hongyan (chinadaily.com.cn)
Updated: 2009-05-26 16:00
Prices of major building materials in China rose in April after months of decline, thanks to demand driven by the country's stimulus package, according to a statement on the Ministry of Industry and Information Technology's website.
The industrial output of building materials enterprises rose 14.4 percent to 163.3 billion yuan ($23.93 billion) in the first four months of this year, and output in April jumped 15.4 percent to 50.3 billion yuan.
Industry factory prices in April rose 0.28 percent month-to-month or 2.61 percent year-on-year, the first jump since October.
China produced 429 million tons of cement in the first four months, up 10.2 percent from the same period last year, with production in April alone rising 10.8 percent to 147 million tons, the biggest growth since last August.
Production of clinker rose 8.8 percent to 302 million tons in the January-April period. [clinker = cement]
China Daily reports that gold fever grips chinese investors.
Gold fever grips Chinese investors
By Wang Ying (China Daily)
Updated: 2009-05-29 09:38
Bitten by the gold bug, Chinese investors are now rushing to hoard the yellow metal as fears over the global recession deepen.
The increased sales of gold bars and gold jewelry in Shanghai, Beijing, Guangzhou and other large cities are reflected in the precious metal's price surge on the Shanghai Gold Exchange (SGE), which trades in gold contracts for forward deliveries. Gold prices quoted on the SGE have increased by an average 6.74 percent in the past month to the current level of about 209 yuan a gram.
"Gold demand in China in the first quarter rose to 114 tons, up 2 percent over the same period last year, solely boosted by an increase in jewelry demand," according to the latest Gold Demand Trends report for the first quarter of 2009 published by the World Gold Council.
The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36 percent rise in value. China is the world's second largest gold
consuming country after India.
Inspired by the increase in the government gold reserves, the more savvy investors are also buying shares of Chinese gold producers on the Shanghai Stock Exchange and the smaller Shenzhen Stock Exchange.
In late April, Hu Xiaolian, the head of China's foreign exchange agency, said China's gold reserves had risen 75.67 percent to 1,054 tons since 2003. Analysts said they expect the Chinese government would continue to raise its gold holdings as the renminbi becomes increasingly internationalized.
"China's gold reserves may serve as backing for the yuan as Beijing is stepping up the promotion of its use overseas," said Albert Cheng, director of the World Gold Council's Far East Division.
"As we know, in late April, the People's Bank of China announced its gold reserves had risen 454 tons since 2003 to 1,054 tons, a signal that the central bank is taking gold as a reliable hedge against financial uncertainties," said Cheng.
According to Cheng, China now plays a greater role in the global gold market. Based on its increased holdings, China is fifth-largest gold reserve nation after the United States, Germany, France and Italy. In addition, China is also the world's largest gold producer and the second-largest gold jewelry consumer next to India.
"China's demand for gold bullion reached 68.9 tons in 2008, up 176 percent from 25 tons in 2007," said Cheng.
Cheng said gold differs greatly from other investments. "You cannot make a fortune overnight from gold trading, but you won't lose your shirt instantly in gold trading, either," he said. For personal investors, Cheng's advice is: it is never too late to enter the gold market, because gold purchases pay off in the long run.
Gold-related shares on the Chinese bourses have also rallied in recent days. Zhongjin Gold Co surged by 9.29 percent to 76.73 yuan on Wednesday, while Shandong Gold Mining edged up by 5.55 percent to close at 44.5 yuan.
"The declining value of the dollar along with the worsening economic outlook is forcing investors to seek other anti-inflationary investment tools, like gold," said Xiao Zheng, analyst, Ping An Securities.
Immediate-delivery gold prices reached a three-month high on May 22 in New York at $959.75 per ounce, the highest since Feb 26, a reflection of growing fears on worsening global economic outlook and devaluation of the greenback, analysts said.
The precious metal has moved up by 19.73 percent from this year's low of $801.59 an ounce on January 15. Gold prices on the Shanghai Gold Exchange (SGE) also saw a monthly growth of 6.74 percent, from 195.42 yuan on April 22 to 209.05 yuan on Monday.
The global economic indicators have also not exactly been rosy. The latest figures released by the US Commerce Department showed a further sign of economic decline. Buildings permits fell 3.3 percent to a record low of 494,000. The Dollar Index, a measure of the greenback against Euro, Japanese yen, British pound, Canadian dollars, Swiss franc and Swedish krone, lost 3.4 percent this week on speculation that the US government's creditworthiness may be weakening.
"Key indices are pointing to a downside trend. Investors prefer to stock value-retaining gold," said Xiao. He added that gold outperforms other non-ferrous metals.
Huang Hao, analyst, Sealand Securities, said the recovering demand from India, the world's largest gold consumer in May is also an important reason for the recent gold price hike.
Reuters reports that annual growth in China's broad M2 measure of money supply rose to a record 26.0 percent in April.
Thomson Reuters
China M2 up 26.0 pct, loan growth eases
05.11.09, 05:51 AM EDT
BEIJING, May 11 (Reuters) - Annual growth in China's broad M2 measure of money supply rose to a record 26.0 percent in April from 25.5 percent in March, the People's Bank of China said on Monday.
Chinese banks issued 592 billion yuan of new yuan loans in April, well down from a record high in March, but the earlier lending spree still left total local-currency loans 29.7 percent higher than a year earlier, close to March's year-on-year reading of 29.8 percent.
Growth in M1 money supply rose to 17.5 percent from 17.0 percent a month earlier. Some economists are watching the narrower gauge closely for signs that businesses and consumers are switching more money to demand deposits as they prepare to ramp up spending.
The median forecast of economists polled by Reuters was for a 29.5 percent increase in the stock of loans and a 25.0 percent rise in M2.
Money supply (percent change on a year earlier):
Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul
M2 26.0 25.5 20.5 18.8 17.8 14.8 15.0 15.3 16.0 16.4
M1 17.5 17.0 10.9 6.7 9.1 6.8 8.9 9.4 11.5 14.0
M0 11.3 10.9 8.3 12.0 12.7 9.0 10.6 9.3 10.9 12.3
Yuan lending in the first four months totalled 5.17 trillion yuan.
That already tops what the government had said was its minimum target of 5 trillion yuan over all of 2009 to support economic growth. [China achieved its yuan lending target for all of 2009 in just four months…]
Some economists had expressed worries that the boom in lending was out of hand [I am not an economist (not by trade anyway), but I too think China’s lending is out of control]. The lower rise in April came after a series of officials called for a steadier flow of credit.
New yuan lending in 2008 was 4.91 trillion yuan, up 35.3 percent from 3.63 trillion yuan in 2007.
Yuan loans (trillions, percent change from a year earlier):
Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul
Lvl 35.6 35.0 33.1 32.0 30.4 29.6 29.8 29.7 29.3 29.0
Chg 29.7 29.8 24.2 21.3 18.8 16.0 14.6 14.5 14.3 14.6
Chinese Money Supply
Chinese Money Supply Growth
My reaction: Inflationary forces are building in China.
1) Edible oil prices are set to go up in China following the surge in the prices of imported soybean from the US. The price increase is largely due to fears of a shortage in supplies this year.
2) China imported over 10 million tons of soybeans during the first quarter of 2009, up 30.4 percent over same period last year.
3) The Chinese government has been purchasing soybeans from the market to protect the interests of domestic peasants and encourage them to keep planting. This is forcing China to import more soybeans from America.
4) Food prices climbed 2.4 percent in April in Beijing, with the prices of vegetables rising 7.4 percent and the prices of grain increasing 5.4 percent
5) China has raised gasoline and diesel benchmark retail prices by 400 yuan ($58.6) per ton, which would increase the benchmark retail price for gasoline by 7 percent and the price of diesel by 8 percent. It is the third oil price adjustment this year.
6) Chinese spot steel prices edged up this week for the fifth time in a row as traders continued restocking. Since end-users' steel inventory remains quite low, traders are preparing for their return to the market to further build up stocks.
7) Prices of major building materials in China rose in April, with industry factory prices rising 0.28 percent month-to-month or 2.61 percent year-on-year.
8) Gold demand in China in the first quarter rose to 114 tons, up 2 percent over the same period last year, solely boosted by an increase in jewelry demand.
9) Annual growth in China's broad M2 measure of money supply rose to a record 26.0 percent in April.
10) Yuan lending in the first four months totaled 5.17 trillion yuan, which already exceeds China’s minimum target of 5 trillion yuan over all of 2009.
Conclusion: I have been predicting hyperinflation would start in China, leading to the dollar's collapse. Now it is happening. China’s Stimulus efforts has resulted in record money supply growth and accelerating domestic consumption. China is suck up the world’s supply of raw goods, putting massive upwards pressure on commodity prices, especially soybeans. It is a matter of months (if not weeks) before this intense demand for physical commodities runs through US inventories, causing defaults in future markets. The dollar will then collapse as nations around the world sell off their US reserves in an attempt to suppress out of control inflation.
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Pardon my skepticism, but I don't understand why hyperinflation in China will lead to hyperinflation in the US.
If the Yuan experiences hyperinflation, the US dollar will become stronger related to it. All goods produced by China will become much cheaper in terms of the Euro, the Dollar, or the Pound.
China certainly wouldn't want to dump their US holdings at this point.
Your main argument seems to be that a delivery failure in the futures market will lead to physical hoarding of commodities. While I'm not refuting or concurring with that sentiment, that appears to be completely orthogonal to the Yuan or hyperinflation in China.
Please help me understand. :)
Here is an example for you Nick:
Soybeans in China = $14.88 per bushel
Soybeans in US = $12 to $12.50 per bushel
As a result China is importing like Crazy from the US...
ALL EYES ON CHINA
While one never knows where China will quit buying soybeans, there are a few indicators to watch for clues.
Jason Ward, Northstar Commodity Investment Co., says watch the domestic price of Chinese soybeans. "Wednesday night, China's beans settled at $14.88 per bushel, up 20 cents. If their domestic price stays well above U.S. prices, it is hard to forecast that they stop buying. Landed prices, to China from the U.S., range between $12 and $12.50. So, China is still buying our product considerably cheaper."
and that is leading to a shortage in the US...
July soybeans closed at $11.47 ½, up 19 ½ cents. The main driving force in the current market is demand, nearby China are still buying way too many US beans for the supply/demand equation to be comfortable. The USDA cut US ending stocks from 165 million bushels to 130 million earlier this week, that is the tightest ending stocks since 2003. Yet already that looks optimistic, things are shaping up to get way more tighter than even that. Stocks to usage is 4.3%, that is the tightest since 1968, and China just keep coming back for more. They bought 132,300 MT old crop and 178,000 MT new crop according to the USDA today. Export sales for the last four weeks are double what they were a year ago. The US will run out of soybeans to sell at this rate long before the late-planted new-crop becomes available. Ending stocks are currently projected to be 130 million bushels, more than a third less than a year ago. And physical stocks got so tight then that the September contract moved up 274 cents on the last day of trade. Where prices will go then is anybodies guess. $15...$18...$20... come on now, you are taking the pi$$? No, I wouldn't be surprised. Forget how many new crop acres will be planted, it's irrelevant. If you want soybeans prior to next harvest you are going to have to pay. Handsomely IMHO. But what do I know?
A dislocation in the soybean market doesn't explain general hyperinflation in the US.
If soybean prices rise to high, there will be shortages of soybeans. Chinese people will eat something besides soybeans, as will the rest of the world. Is this not analogous to the rise in energy prices last year? With more Americans spending their money on gasoline, they had less money for anything else. Did this cause hyperinflation among the oil producers? Arguably it helped lead to a crash.
I find it hard to believe that the world will lose faith in the futures market in general and/or that China will dump their entire US dollar holdings in a pursuit of soybeans...
I'm very interested in hearing a more thorough analysis of what could happen if there were a problem in the futures market. Moving from that to hyperinflation is a leap of faith, IMHO.
Nick said...
If soybean prices rise to high, there will be shortages of soybeans. Chinese people will eat something besides soybeans, as will the rest of the world.
It might not be that easy to "eat something besides soybeans". Soybeans are used to make a very mild and versatile cooking oil. Highly refined soy oil accounts for over 80% of all oil used in commercial food production in the US and China. Almost any product that lists vegetable oil as an ingredient probably contains refined soy oil. This is a good all-purpose oil that is also used in cakes and pastries. If you eliminate everything that has vegetable oil in it or is cooked using edible oil, you don't have too much left.
Besides, you completely miss the point. If faced with soybean prices that are too high, China would have two choices:
1) Sell off dollar reserves and strengthen the yuan. This would lower costs of soybean imports. Since China's demand is now driving their growth, they aren't as dependent on US exports as they used to be.
2) Keep the dollar peg and make drastic changes to their way of life in order to "eat something besides soybeans".
Why the hell would China choose option 2?
I think a lot of the doom sayers are going ot end with pie in the face. The dow has rallied and established a new bull trend. Will this be the last bubble ? In view of the Presidents efforts which are clearly paying off, the drop in dollar is manipulated and will be kept low to ensure a watering down of the debt. I mean the consumer is spent out so who is behind this rally? The govt ?? or even the chinese ?? pumping billions in to stock ?? I think for once the doom sayers have got it all wrong. Expect a dow strong rebound to 12,000 and from then on to a stable 10,000 before vaulting to 16,000+.
lol vahadad,
just on the fundamentals alone (unemployment rate, housing market, sales figures, production out put and gov. created debt which will be put on the backs of the tax payer) your assignment of the state of an economy is by far too optimistic.
this being the case i hope you have your money out of the market, for being so blind you're going to not only lose your pants but everything you ever owned and held dear.
dear anonymous, agreed fundamentals are terrible as you have just pointed out which means the market is being manipulated. Now which direction do you think they want to go ? UP Up UP and away obviously... So can you find enough doom sayers to put their money to short the market now?? I dont think so. The Govt / Chinese i think are buying stock , who else has the liquidity to buy american stocks ?? This way the Chinese protect their Dollar assets. Soon you willbe hearing that some major corporations are owned 40% by the chinese. All this with approval of Geithner ofcourse , Why doyou think he went to China recently ?? to talk about yuan manipulation NO NO NO / he is asking the chinese to buy stock simple as that at throwaway prices . It does make sense for the chinese as they gain greater power over the so called western hemisphere - strategic to their ideology..
vahadad,
there is no question that stocks are being manipulated, but your assessment of china being in on the manipulation is dead wrong.
there is only one thing that america has that china could ever want.
and of the corporations that america has there would be only a hand full that china would ever feel the need to goto extreams as to dump its money into the american market.
these corporations we hold dear are tied to our military industrial complex (so like boeing or lockheed and ect.).
outside of these corporations china could produce anything america can, and probably much cheaper (except the one thing i haven't stated yet).
besides why would china want to own stocks in a nation that has no production value (outside military technology)?
it doesn't because again it can produce anything it wants and has the capability to produce what it wants on a global scale.
the problem is that your view of the situation is that china is dependent on america, and its not any more - this is a fact.
if anything china willingness to break the dollar hegemony is based on creating a world where global power distribution is more even.
lol,vahadad, for in the end china has no need for a dying nation thereby increasing the number of mouths it needs to feed.
and speaking about feeding, that is the only thing america has over all other nations - farm land.
Just so I am clear, buy buying Yuan now, I am setting myself for a nice profit in the future?
So the next step is the US prohibiting soy exports?
I guess so. First, the US$ will drop. It already does -- *and* the DJIA lags behind the DAX in nominal terms despite the loss of US$ in terms of EUROs. So we seem to have a global investment sentiment shift right at hand.
Further down the road, maybe with even more funny US$ money printed by gov, the US cannot afford to compete in the international food markets. They will have to close their own to outsiders.
*That* could drive prices even higher. Obama already started to destroy the US legal system in the case of GM and Chrysler. I have no doubts he will continue to do what is necessary in the best interest of his country.
What do *YOU* think?
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