China is the world’s leading consumer of vegetable oil and the second-largest producer after Indonesia. Amidst import challenges, production shifts, and shrinking stocks, the vegetable oil complex in China is changing.
Soybean oil accounts for more than 40 percent of oil consumption in China and the country relies heavily on imported soybeans to crush. On average, nearly three-quarters of China’s soybean supply is imported, and 70 percent is crushed. However, this past marketing year (Oct/Sept 2018/19), China’s soybean supply dropped nearly 8 million tons from 2017/18, after consistent growth, resulting in reduced oil production.
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Rapeseed is also a major contributor to vegetable oil use in China, and the country relies on its domestic production for oil. However, rapeseed production declined by nearly 8 percent from 2014/15 to 2018/19 causing China to double imports of rapeseed oil over the same time period. China also imports rapeseed to crush for oil; however, imports are down more than 1 million tons from 2017/18 due to trade tensions with Canada. Ironically, China is importing less Canadian rapeseed, but importing more rapeseed oil and meal from Canada.
China’s imports of vegetable oil are increasing overall. Higher palm oil imports are replacing some of the “lost” soy oil; however, vegetable oil stocks continue to decline. For example, vegetable oil stocks are at a 4-year low as of 2018/19 and with an expected 2-percent growth in consumption are forecast to decline further. From 2015/16 to 2019/20, stocks are forecast to drop by a whopping 70 percent driven mostly by rapeseed oil. As domestic oil production remains flat and stocks shrink, imports are likely to become even more critical to China’s vegetable oil supply.