If every person in China consumed one tablespoon of soyabean oil annually, the world trade in soyabean oil would double.
That estimate by the Chicago agricultural forecasting firm, AgResource, is a testament to China's potential as a consumer of agricultural commodities.
In the recent past, China's ravenous appetite has led to increased imports of a whole range of products, from grain, seeds and fruits, to ginseng, a popular aphrodisiac.
China's appetite for soyabeans, for animal feed and cooking oil, has helped Argentina and Brazil climb back from economic crises, and it has boosted the Canadian dollar, as exports from that resource-rich country find their way to China.
Unfortunately, with the Chinese government determined to dampen growth, there are signs that the good times may be over.
. Take the case of soyabean. Soyabean prices are facing a downturn as China, the world's largest buyer of the commodity, announced measures to arrest credit growth in mid-May.
Pressured by poor operating margins, some Chinese soyabean crushers are scrambling to form a price cartel to prevent soyameal prices from falling further, but the move is unlikely to succeed, given the intense competition in the industry, say analysts.
Despite feed demand softening amid the SARS epidemic, and the more recent bird flu outbreak, it was not until the Chinese government decided to arrest credit growth that crushers found themselves in the precarious position they are in now.
Their problems were compounded by the fact that many had booked Brazilian soyabean cargoes at substantially higher prices than the market can absorb now. The November soyabean futures contract on the Chicago Board of Trade has fallen by nearly $1 a bushel since peaking on April 5.
In an initial knee-jerk reaction, 16 of China's largest crushers met in Beijing on May 16. They announced plans to cut imports by 40 per cent in the second half of 2004 and share existing stocks. The move sent the Chicago Board of Trade soyabean prices into a tailspin.
This, along with a ban imposed by the Chinese quarantine authorities on seven trading houses from selling Brazilian soyabeans, has applied the brakes on soyabean imports by the world's largest buyer in the last three weeks.
Now, that has had an impact on Indian farmers. "China's rejection of soyabean imports has resulted in the world edible oil markets crashing over the last three months. It is also cancelling soya oil and palm oil imports because of high international prices and freight rates.
"Since the prices have been depressed, Indian farmers are likely to be hesitant to diversify into oilseed crops. It may affect sowing, but things are largely dependent on the monsoons, which is expected to be normal to better than normal," says BV Mehta, executive director, the Solvent Extractors' Association of India.
China also has an effect on world sugar prices, although the Indian demand, too, is a large factor. Large sugar stocks in China and India should keep world prices weak in the near term, but surpluses should eventually ebb, mildly lifting prices in the next crop year, according to the International Sugar Organisation.
Peter Baron, executive director of the ISO,
The biggest stocks are in India, the second largest sugar producer, which has an estimated 10-11 million tonnes. Other major inventories are in China, which holds 3-4 million tonnes, and Indonesia, which has about a million.
"We have accumulated stocks everywhere and that means that as long as the stock is high, it should put some pressure on the price," he said.
Back home in India, the sugar industry is undergoing a crisis and domestic prices are significantly lower than international prices.
Jigar Shah, vice-president, KRC Stock Brokers, points out that this is despite a very low crop of just 15.5 million tonnes this year, compared with the average of 18 million tonnes in a normal year.
"India is currently paying 60 per cent import duty on sugar, and the situation is likely to remain tight in the near future. The current retail prices of sugar are ruling around Rs 14 per kg," he said.
Domestic sugar prices are on an uptrend following the failure of the sugarcane crop in the dominant sugarcane producing areas such as Maharashtra, Tamil Nadu and Andhra Pradesh.
In palm oil, India is a big player. Lower demand from India this year, concerns about potential contract defaults or cancellations by China and the rising global palm oil production, have dampened sentiments in the palm oil market.
CPO futures on the Bursa Malaysia Derivatives fell as much as 25 per cent in the past month, with the benchmark August contract hitting a near eight-month low of MYR1, 435/tonne.
The contract has since recouped some of its losses to end at MYR1, 610/tonne amid active short covering, according to Derom Bangun, chairman of the Indonesian Palm Oil Producers' Association.
The steep drop in edible oil prices, coupled with the Chinese government's credit tightening, have triggered fears that the Chinese importers may reject delivery of some hundreds of thousands of tonnes of palm oil.
Traders said, however, that Chinese importers had sought to re-negotiate prices for the purchases, raising hopes that defaults could yet be avoided.
In cotton, Chinese production is projected to increase by 1.2 million tonnes this season, accounting for three-quarters of the total increase in global production.
Mill use in the rest of the world is expected to drop by 100,000 tonnes to 14 million tonnes, the lowest since 1994-95. With production expected to exceed mill use in 2004-2005, the world's ending stocks are projected to rise to 8.6 million tonne, an increase of 700,000 tonnes from the current season.
Cotton prices during 2004-2005 are expected to be lower than the previous year's level owing to large carryover stocks and higher production.
Cotton prices in China have seen a downtrend over the past few months, pressured by the prospect of higher supplies and sluggish demand. In India, too, the price outlook is not very rosy.
"With international prices ruling high last year, more farmers will be inclined to grow cotton. In this scenario, cotton prices are likely to remain soft in the coming months," an analyst said.
