Business

Mon May 26 23:57:17 PDT 2008

CHENGDU, China, May 27 (Reuters) – In the midst of collapsed houses and towns ruined by the Sichuan earthquake, farmers have returned to their fields to cut and thresh golden rapeseed before rains come.

The province accounts for about 15 percent of China’s rapeseed crop, used in cooking oil. Although most villages on the Sichuan plain were not much affected by the May 12 quake, which killed an estimated 80,000 people, mostly in hill towns, it did damage some crushers and could make storage more difficult.

There is enough crusher capacity elsewhere to make up for the loss of some crushers in Mianyang, Deyang and Shifang that border the fault line, especially once power to the undamaged plants is restored, traders said.

"We don’t know what to do with the crop, but we will harvest it and then we’ll see," said Li Rong, whose family is now living in a tent by their fields an hour and a half from Chengdu.

"Our main problem is storage if it’s wet, then it doesn’t last. If the weather is dry, it can stay for a while."

Crushers normally begin buying soon, in order to begin crushing in mid-June. But some are delaying until prices come down, leaving the crop vulnerable to rain in those areas where farmers no longer have buildings to protect it.

Rains could also trigger more landslides in the mountains, complicating relief work and adding to the misery of 5 million people displaced by the quake.

"The government wants crushers to buy at 2.8 yuan a jin to support macroeconomic policy, but the crushers are resisting, because they feel that is too much of a risk," said a rapeseed trader. A jin is half a kilogramme.

That price works out to about 5,600 yuan ($807) a tonne, well above the current market price in central China of about 4,600-4,800 yuan a tonne <0#ASRAPE-CN>.

Other traders said that farmers themselves were holding out for a better deal.

Rapeseed oil prices have fallen steadily since they spiked above 16,000 yuan in early March, and with the harvest coming in, most crushers are reluctant to buy seeds at too high a price.

"The crushers feel that anything that puts them over 12,000 a tonne for oil is too much of a risk, given that the port price for oil is now around 10,600-10,800 yuan a tonne" he said.

Rapeseed oil prices in central China currently range between 11,500-12,200 yuan a tonne <0#ASRAPEOIL-CN>.

Rapeseed oil imports ticked up in April, to over 20,000 tonnes, and more rapeseed oil, soyoil and palm oil is on its way, traders said.

($1=6.939 Yuan)

(Reporting by Lucy Hornby)

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