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Published on January 12, 2008

The Internal Trade Department yesterday approved the import of 60,000 tonnes of crude palm oil as a short-term measure to ease a domestic shortage that threatens to hike the price of edible palm oil.

The move is aimed at increasing the country's stock of crude palm oil, which must stand at 150,000 tonnes per month for supply security. However, the stockpile has dropped to 98,000 tonnes now. Of the monthly stock, 70,000 tonnes go to the cooking-oil industry and 30,000 tonnes for biodiesel production, leaving 50,000 tonnes for security supply.

The department will propose the import plan to the palm-oil-system monitoring committee for approval next week. If approved, the commodity could be imported from Malaysia and Indonesia this month. The Public Warehouse Organisation (PWO) will handle the imports and distribute the crude oil to manufacturers.

The Commerce Ministry reported crude palm oil from Malaysia was quoted at Bt32 a kilogram, less than Thailand's price of Bt35 to Bt36. Under the Asean Free-Trade Agreement, imports of crude palm oil are subject to a 20-per-cent tariff.

Internal Trade Department director-general Yangyong Phuangrach yesterday said the government believed imports would ensure a sufficient supply and that this should pull down the kingdom's palm-oil price.

"Following the imports, the ministry will not allow any palm-oil manufacturers to increase prices further. Lower costs of the raw material should ensure a sufficient supply of palm oil in the domestic market," he said, adding that following the imports, there would be no reason for palm-oil traders to raise their retail prices, at least not for a while.

The department has also barred canned-fish manufacturers from raising their product prices.

Yangyong said the shortage problem now was due mainly to the fact that two major palm-oil manufacturers - Morakot and Olyne - suspended manufacturing late last year after facing losses from rising production costs.

The government will separate their allowance of palm-oil imports into three lots of 20,000 tonnes each. If the first lot of palm oil imported can solve the domestic shortage, the government may not need to allow more imports, said Yangyong.

The ministry also expects palm-oil prices and shortages to be relieved after the beginning of the next harvest season in March.

Asian Palm Oil managing director Nipon Udompholkul said the imports should not hurt palm-oil farmers, because the palm-fruit price was very high.

The imports should bring down the price of Thai palm-oil fruit by Bt1 per kilogram. As long as the price does not fall below Bt3 per kilogram, farmers should not be hurt.

Nipon also expressed concern that a delay in imports would cause palm-oil smuggling. In addition, the Malaysian government will likely suspend its palm-oil exports, because that country is also facing a palm-oil shortage.

Despite the imports, the industry is still expressing concern about the measure, saying it will not solve the cause of the scarcity in the long run. One source with a refiner said the excessively high price was due to the government's push for the product, and consumers and palm-oil manufacturers alike were now being affected.

Energy Minister Piyasvasti Amranand showed his support to the Commerce Ministry's move to allow imports of crude palm oil.

He also noted that contract farming, in which farmers in neighbouring countries are contracted to plant trees for Thai companies, should be promoted, in order to raise regional support in combating high energy prices.

"The National Economic and Social Development Board should review this strategy and resubmit it to the next government for consideration. This project would benefit Thailand and the entire region," he said.

The Energy Ministry plays a major role in boosting demand for palm-oil-based biodiesel. It has ordered all oil retailers to sell B2 diesel from February 1 and plans to introduce B5 by 2011. The required mixture of biodiesel in diesel will raise demand for palm oil.

Petchanet  Pratruangkrai

The Nation