China may speed up its soybean imports after the Lunar New Year and slow its vegetable oil buys as floods cut off palm oil supply in Malaysia and if port strikes further stall Argentine soyoil exports.

The world's largest food shopper needs to restock to process cooking oil after the holiday, which starts on Wednesday for ten days, while reining in food prices that have been driven up by a series of weather events since last summer.

On top of the shopping list: U.S. soy cargoes and an ample, incoming Brazilian soybean crop, which can potentially cut edible oil imports by 10 percent to about 6.1 million tonnes for the marketing year to September 2011, according to industry estimates.

That would represent a second straight year of declining imports and would weigh on U.S. soyoil and Malaysian palm oil futures that have been pricing in weather premiums and higher biofuel prices as crude oil hovers near $100 a barrel.

The situation is very bullish for vegetable oils and China will look to buy a more significant amount of soybeans this year from Brazil and the U.S. to escape paying a lot more for palm oil and soyoil, said Abah Ofon, a Singapore-based analyst with Standard Chartered Bank.

When China re-opens after the holidays, it could be a whole new ball game for the country with more than 1.3 billion people to feed and headline inflation likely to hit a 30-month high in January.

A week-old port strike over wages in top soyoil supplier Argentina's export hub has stopped 45 ships from loading grains and prevented soy crushers from going to work, lifting the soy complex to a 28-month high.

Adding to the supply squeeze, floods in southern Malaysia have partly submerged estates in a key oil palm growing region, forcing refineries to delay shipments and exposing palm fruits to excessive moisture that affects yields.

Low stock-to-use ratios and soaring edible oil prices may force big Asian food buyers to shift some of their rice and soybean stockpiling efforts to include palm oil and soyoil as they try to limit public unhappiness over rising food costs.

Top trader Cargill has seen more buying and stockpiling of oilseeds in the Maghreb region alongside the Egypt unrest triggered by complaints of poverty and repression under President Hosni Mubarak.

BATTLING INFLATION

China scrambled for palm oil cargoes when La Nina-floods submerged most of Malaysia's key oil palm growing region in 2008, helping to power palm oil futures to a record high of 4,486 ringgit in March that year.

Palm oil will be bought on a hand to mouth basis. There will not be a big buying spree as there will be more than ample soybeans to take up from the Americas, said a trader with a listed plantation firm.

China's battle with inflation has changed the situation and amplifies the shift to soy from edible oils during the peak consumption season that started with the Mid-Autumn festival in September and ends with this week's Lunar New Year holiday.

Beijing aggressively sold its vegetable oil reserves and ordered firms to freeze cooking oil prices until the end of the first quarter in 2011, which has changed the economics of importing by driving local prices much lower than global prices.

South American soy for May shipment gives a crushing profit of 81 yuan per tonne but soyoil incurs a 320 yuan per tonne loss to hedge on Dalian commodity exchange, the China National Grain and Oils Information Center (CNGOIC) said recently. Losses from palm oil stand at roughly 589 yuan.

There is no price advantage for soyoil. We expect lower imports in the year 2010/2011, or 300,000 tonnes lower, said one analyst with CNGOIC.

The demand will have to be met by processing more soybeans, where we expect an increase of 4 million tonnes in the year, which will be equivalent to 800,000 tonnes of soyoil and the shortage in imports can be easily covered, the analyst said.

BRAZIL TO TRUMP ARGENTINA?

CGNOIC estimates China purchases of soybeans will hit 54 million tonnes in the current marketing year, up about 7 percent from the previous year, which could help crank up its 100 million tonnes soy processing capacity, of which more than half lies idle.

The world's top soy exporter, the United States, is more bullish. Its department of agriculture projected China imports to hit a record 57 million tonnes for the marketing year ending Aug 2011, with at least 42 percent coming from the country's grain belt.

The more interesting story is that Brazil will edge out Argentina in this race as there has been fewer problems with the soy crop, said a U.S. grains trader in Chicago.

Moderate rains over Brazil's key grains belt are pushing soybeans into a bumper crop with harvesting set to pick up speed this month, giving China an opportunity to secure supplies.

Although two weeks of widespread rains have brought relief to soy crops in parts of Argentina after a lingering dry spell, a port strike has cut off its grain and edible oil shipments from the rest of the world.

We are putting in orders for Brazilian soy, it is not worth waiting for the Argentina strike to pan out. When China opens, orders need to be met quickly, said a trader with a Singaporean firm that ships soybeans to China.