The edible oil price could stay high after the government cleared a major oil producer to raise its prices.

The National Development and Reform Commission (NDRC) said on its website it approved Kerry Oils and Grains on Tuesday to lift its edible oil price. Its Arawana line is the largest edible oil brand in China.

The company said it hasn't yet decided whether to lift prices as soybean costs unexpectedly fell in the past week after increasing for 18 months.

But analysts said the edible oil price will remain high in the near future and the NDRC's move is a sign it's losing pricing control in the edible oil market.

"Other manufacturers could follow suit if prices of major brands like Arawana go up," Wang Xiaoyu, an oil expert in Heilongjiang, said.

The government recently stepped in by rationing 200,000 tons of deposit oil to major makers to help them contain the price increase and meet market supply.

"The government has limited reserves of edible oil," Wang said, adding that the NDRC's move will keep the price high.

The price of soybean, a main raw material for edible oil, will remain high in the long run, Wang said.

Kerry Oils and Grains applied to raise its prices in the middle of last month. "The raw material price for edible oil has stayed high for a while. The company cannot endure the pressure of a long-term loss," it said in a statement on Wednesday.

But the soybean price has fallen for the past few days. The producer said it will keep a close watch on the market situation and adjust its price accordingly.

The international oil price has been climbing since late last year until the middle of March, while soybean prices have gone up by 30 percent. Many small and medium-sized enterprises have stopped manufacturing and only a few large producers remain in operation despite the loss.

Supply is tight because consumers have been stockpiling edible oil, fearing further price rises.

The NDRC in January introduced a new rule listing businesses that must apply for approval to raise prices.

It's the second time the NDRC has cleared a price rise - milk producer Bright Dairy got the nod last week.

The nation imports most of its soybean supply. But the government is trying to encourage local production.

(China Daily April 3, 2008)