January 12, 2012 / 8:46 AM / 6 years ago

China's Sinograin to expand soy crushing capacity

BEIJING, Jan 12 (Reuters) - China Grain Reserves Corp (Sinograin), which manages the state grain reserves, will expand its commercial operation of soy crushing to profit from the country’s rising demand for cooking oils and animal protein, according to analysts and local media reports.

The expansion will enable the state-owned company to compete for market share with Singapore-based Wilmar International , which now has the biggest crushing capacity and market share of consumer pack edible oils in the country, the world’s top soy importer.

Sinograin Oils Corp, which was set up in 2008, plans to expand its soy crushing capacity to 6 million tonnes in 2012, with 2 million tonnes of refined soyoil production, aiming for more than 10 percent of market share, the China Business News cited its president Liu Jianmin as saying.

The state-owned company began to sell its own brand consumer pack soyoil to supermarkets late last year and aims to sell 200,000 tonnes in 2012, the People’s Daily reported.

“Sinograin has the advantage in competing with Yihai Kerry. It can play with the state reserves of soybean and edible oils” for more market share, said one industry analyst. Yihai Kerry is Wilmar’s China operation.

Last year, to ease food inflation, Beijing had offered domestic soy and soyoil reserves at a discounted price to some commercial crushers to help cap food inflation and such operations could shift to Sinograin alone in the future, said the analyst.

Wilmar has been restricted from further expansion of its soy crushing capacity after Beijing moved to limit market share by foreign companies to ensure its food security.

Beijing has also restricted foreign investment in refinery capacity of soyoil, palmoil, rapeseed oil, peanut oil, cottonseed oil as well as sunflower oil from this year, according to the guidance on foreign investment issued by the Commerce Ministry.

State-owned or private companies can still expand, although the crushing industry faces excessive capacity, with about half capacity not operating. Soy crushing capacity is forecast to increase by 12.5 million tonnes this year to 125 million tonnes.

Sinograin currently runs soy crushers in the cities of Dongguan, Zhanjiang and Rizhao, south of Beijing. The company is also expanding in the northern cities of Tianjin, Tangshan, neighbouring Beijing as well as Xinzheng in central Henan province. The expanded capacities will come onstream this year, analysts said.

Besides its commercial role, Sinograin also manages the state silos of grains, soy and edible oils. The company bought more than 3 million tonnes of U.S. corn last year to help refill depleted state reserves.

It also purchased 11.8 million tonnes of domestic corn, 2.94 million tonnes of soy, 6.54 million tonnes of rice and 3.37 million tonnes of rapeseed for state reserves from farmers last year, the company said in a report posted on its website (www.sinograin.com.cn).

The company releases these reserves whenever domestic supplies are tight and prices rise above the level the government can tolerate.

Last year, it released from state reserves of 3.54 million tonnes of corn, 7.63 million tonnes of rice, 18.53 million tonnes of wheat to the domestic market. It also sold 2.53 million tonnes of soy to some crushers, according to the report.

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