Published on December 11, 2007
The Commerce Ministry is confident it has a measure in place to protect consumers from an increase in food prices driven by the skyrocketing prices of crops used to make alternative fuels, but officials and private companies agree that Thailand needs to put farm-product development and food security on the national agenda to balance supply for consumption and energy.
Higher prices are encouraging farmers to switch from food crops to fuel crops such as maize, cassava and palm, used for ethanol and biodiesel production, creating a scarcity of food plantation areas that will drive up farm-product and food prices.
However, the Internal Trade Depart-ment's director-general, Yangyong Phuangrach, said he was sure the increase would be fair.
"The ministry is not worried much about a surge in product prices in the next few years as we have a price-control policy to protect consumers, as well as measures to keep inflation in check," he said.
The Commerce Ministry controls the prices of more than 370 products, including vegetable oil, soya beans, animal feed, milk, soap, instant noodles, canned fish and rubber tyres.
According to Yangyong, the department will put tighter controls on each product to ensure that manufacturers do not pass their higher burden on to consumers. However, if a product's price has to be increased, the ministry will make sure it is reasonable.
Meanwhile, manufacturers can delay price increases by reducing their spending on advertising, marketing and logistics costs, Yangyong said.
A ministry study found that the cost of logistics for a manufacturer accounted on average for 21 per cent of the total price of their goods and advertising costs for 20-40 per cent. The ministry is also encouraging farmers to increase the yield of fuel crops per rai to ensure sufficient supply of food crops. Moreover, instead of growing all kinds of fuel crops, Thailand needs to prioritise crops that benefit the country the most.
For ethanol production, for instance, the government should promote cassava rather than maize. While only three kilos of maize are required to make one litre of ethanol compared with six kilos of cassava root, the price of maize is Bt8 per kilo compared with Bt2 for cassava root.
"The yields must be raised as we have a limited area for agriculture. We need a national agenda to ensure sustainable growth in the farm sector," Yanyong said.
Pornsilp Patcharintanakul, vice chairman of the Board of Trade of Thailand, agreed.
"The oil-price hike is certainly affecting the supply of fuel crops and leading to shortages in raw materials and a hike in food-production costs," he said.
Pornsilp foresaw shortages in the near future and said he believed the government should promote genetically modified (GM) fuel crops specifically for ethanol and biodiesel production.
To preserve food safety while promoting production of alternative fuels, he suggested the government demarcate zones for plantation of GM crops.
The Commerce Ministry said last week that the prices of raw materials for animal feed had surged this year, due mainly to the high demand for fuel crops.
A source at the ministry said the plantation areas of three fuel crops, cassava, maize, and sugarcane, were fluctuating, depending on prices.
The ministry is trying to increase the yield per rai of cassava root from 3.5 tonnes currently to 7-9 tonnes in the next five years. The plantation area of cassava in Thailand is currently 7 million rai.
The country has 2.2 million rai of oil-palm plantation, which the Agriculture Ministry is trying to increase to 5 million rai in the next five years. However, the yield of palm oil per rai is quite low, only 2.8kg compared to more than 3kg in Malaysia, the world's largest palm-oil supplier.