UPDATE 1-China buys soy amid inflation fears

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BEIJING/HONG KONG, Nov 14 (Reuters) - The Chinese government is buying soybeans from the United Sates and South America to replenish its state reserves, amid fears soaring cooking oil prices might fuel inflation already running at 11-year highs.

Traders said the government had bought at least three to four cargoes of soybeans for December and January shipment since late last week.

It sealed deals on U.S. cargoes at cost-and-freight premiums of 340-350 U.S. cents over the Chicago March contract.

"We believe they bought already 3-4 cargoes from US. Most of them should be late January or early February shipment," said a trader with an international trading house.

"Domestic supply may have some problems. The other reason is depreciation of the dollar -- they want to convert some reserves into commodities."

Beijing was also expected to extend its special lower duties for soy imports by another three months, they said. Beijing cut the duty to 1 percent from 3 percent for the three months starting in October in an attempt to curb rising food prices.

Cooking oil prices, a major driver behind the decade-high inflation, rose 34 percent in October on the year.

The high prices have led to panic buying of cooking oil by Chinese in some cities and were blamed for a stampede over the weekend at a Carrefour (CARR.PA) store, as shoppers scrambled for cut-price cooking oil.

"The government was very worried and was studing measures to try to ease the situation," said a source close to the government.

Domestic soyoil prices <0#ASSOYOIL-CN> were 1,000 yuan per tonne higher than record 1994 prices, added the source.

Traders said the government was likely to buy a total of 500,000 to 5 million tonnes of soybeans in a move aimed also at shifting its foreign reserves into resources.

Strong demand from China, the world's top importer of the oilseed, drove soybean futures on the Chicago Board of Trade<0#S:> to fresh three-year highs overnight. The market extended gains and rose more than 1 percent in Asia trade on Wednesday. (Reporting by Niu Shuping, Nao Nakanishi; Editing by Valerie Lee)