Better security for palm oil supply pushed

Better security for palm oil supply pushed

Industry wants buffer stock as insurance
The government should create a "safety stock" of at least 150,000 tonnes of palm oil to secure supplies and avoid future impacts from shortages on consumers or businesses, says an industry group.

The industry needs medium- and long-term strategies to prepare for freer trade under the Asean Economic Community in 2015, said Wiwan Boonyaprateeprat, secretary-general of the Thai Oil Palm and Palm Oil Association.

The association pressed for the creation of a buffer stock following severe shortages earlier this year because of flood damage to crops in late 2010. However, the proposal was shelved after supplies returned to normal.

Palm oil stocks are solely the responsibility of the private sector, which could lead to risks for price stability.

Crude palm olein (CPO) inventories totalled 230,000 tonnes in June and July which were quite high but there was no impact to domestic prices because businesses exported the surplus, while farmers enjoyed an average price of 5.50 baht a kilogramme for fresh palm nuts.

The Commerce Ministry still caps the retail price of bottled palm cooking oil at 42 baht a litre while products sold under its Blue Flag project must not cost more than 32 baht a bottle.

Ms Wiwan viewed that without a controlled ceiling price, palm oil prices could be even cheaper than 42 baht a litre due to abundant supply.

However, domestic prices are still not attractive to the private sector so businesses are exporting CPO to balance overall income.

The buffer stock issue is expected to be raised in the first meeting of the National Oil Palm Policy Committee once a new committee is appointed.

Ms Wiwan said businesses also wanted the new government to clarify its energy policy, especially its proposal to cancel the collection of some fuel levies by the state Oil Fund, which may in turn affect planning for palm-based biodiesel production.

She said government subsidies for biodiesel had attracted more producers, but if the gap between conventional diesel and biodiesel narrows, biodiesel producers would be reluctant to increase production.

Currently, CPO is imported from Malaysia via Thailand to southern China while Thai entrepreneurs export CPO to Malaysia.

All parties in the industry, she said, should consider long-term development to add value, such as palm-based jet biofuel, which needs economies of scale.

Apichart Jongsakul, secretary-general of the Office of the Agricultural Economics, confirmed that despite the high volume of CPO production of 230,000 to 250,000 tonnes in July, there was no surplus because of exports.

He said B4 biodiesel production required 35,000 litres of CPO a month, up from 30,000 in June.

The Agriculture Ministry estimates production of CPO will rise to 280,000 tonnes in November and 340,000 in December.