Bleak outlook for palm oil

Bleak outlook for palm oil

Thai oil palm and palm oil exports are in trouble, as shipments of local products are less competitive because of high prices as a result of the government's price-intervention scheme.

Global demand also remains weak as the world's economy has yet to fully recover, while production from Indonesia and Malaysia are now in a surplus, said Wiwan Boonyaprateeprat, secretary-general of the Thai Oil Palm and Palm Oil Association.

The world's crude palm oil price is now quoted at 22-23 baht per kilogramme. The figures were two baht lower than the rate the Public Warehouse Organisation (PWO) bought late last year to shore up the prices of palm nuts.

Fresh palm nut prices tumbled to only two baht per kg due to oversupply, caused by unusually wet weather that boosted output, caused dissatisfaction among farmers, particularly in the South. Palm oil farmers from six provinces in the South gathered and blocked the road at Chumphon demanding the government intervene in palm nut prices.

The rally prompted the Commerce Ministry to agree to intervene in the market to shore up prices. It also asked the Energy Ministry to encourage private firms and state enterprises in the energy sector to produce and use more palm oil-based ethanol as fuel, as well as to use more ethanol in power generation.

The National Oil Palm Policy Committee agreed last December to buy the price of palm nuts at 4 baht/kg for nuts with 17% oil content and 4.35 baht/kg for 18.5% oil nuts.

In compliance with the committee's decision, the PWO bought 50,000 tonnes of crude palm oil at 25 baht per kg in state stocks.

In light of the government's price intervention policy, Thailand was estimated to control as much as 400,000 tonnes of crude palm oil, a rise from 356,000 tonnes as of last November.

"The oil palm operators are now suffering from a shortage of tanks for crude palm oil storage, as the products are not only competitive in price but also fail to ship because of weak demand and global surplus," Ms Wiwan said.

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