Palm crushing mills and palm refineries are crying foul over a surge in domestic palm prices, citing the impact of the widespread drought on production costs.
Wiwan Boonyaprateeprat, secretary-general of the Thai Oil Palm and Palm Oil Association, said fresh palm nut supply over the last three months had dropped sharply because of the drought, causing its price to rise as high as six baht a kilogramme. The oil content of the nuts is also relatively low at 13-14% compared with 17% normally, she said.
At the request of the government, oil palm crushing factories agreed last year to buy palm nuts from farmers at the same prices sold to oil palm ramp operators -- 4.20 baht a kg -- for nuts with 17% oil content.
But farmers would be subject to a 20 satang charge by ramp operators for the cost of transportation to the crushing factories if they had already been sold to the ramps.
"Higher prices have led crushing mills and palm refineries to face higher production costs and operating losses for some," said Ms Wiwan.
The government imposed a ceiling price of 42 baht a litre for bottled cooking palm oil, based on a quote of 4.20 baht a kg for fresh palm nuts and 26.20 baht a kg for crude palm oil (CPO). She said a surge of fresh palm nuts has brought domestic CPO to 35 baht a kg, a high price relative to Malaysia's 24-25 baht.
"What's worrisome is we're afraid of possible CPO smuggling from Malaysia because of the price gap," said Ms Wiwan.
Thailand maintains CPO stocks of 250,000 tonnes, which is still higher than the "safety level" of 200,000 tonnes.
Ms Wiwan said domestic demand for CPO stands at 80,000 tonnes a month, with 70,000-80,000 tonnes used to make B7, a biodiesel blend of 7% palm oil and 93% diesel.
The Energy Policy Administration Committee said recently policymakers were preparing for the commercial sale of B10 biodiesel nationwide by 2018. Use of that fuel, a blend of 10% palm oil and 90% diesel, is part of the National Alternative Energy Development Plan to raise renewable usage to 30% over the next few years, up from 12%.
Biodiesel was introduced in Thailand in 2001 at 5% concentration, with commercial sales starting in 2005.
Thailand expects to produce 11 million tonnes of fresh palm nuts this year, down from over 12 million in 2015, because of the drought.