The Industry Ministry will seek cabinet approval on Tuesday for the oil palm city project in Surat Thani province to support local farmers in the South and boost competitiveness in related industries.
The mobile cabinet meeting is heading to Chumphon province on Tuesday after visiting Ranong.
Thailand ranks third globally among oil palm producers, with a combined plantation area of 4.5 million rai, trailing Indonesia (58 million) and Malaysia (35 million).
But oil palm prices in Thailand have dropped for the past several years following policy to promote oil palm, which increased plantation area by 6 million rai.
Once supply outstripped demand, the oil palm prices fell.
Deputy Industry Minister Somchai Harnhiran said the oil palm city project is aimed at being an innovation and technology hub for local oil palm, with the expectation of increasing value-added products.
"An R&D unit will be situated in Surat Thani to strengthen competitiveness in the long run," he said. "The ministry will team up with business operators and local farmers to stabilise oil palm prices and the project will connect all related industries across upstream, midstream and downstream segments."
The Office of Agricultural Economics forecasts Thailand's oil palm production will rise 7% to 15.18 million tonnes this year.
Oil palm can be made into many food products such as margarine, confectionery, ready-to-eat meal, snack, chocolate, ice cream and bakery.
Non-food products include soap, candles and cosmetics, as well as additives to biodiesel.
Mr Somchai said the oil palm city project is under the government's plan for the Southern Economic Corridor (SEC) scheme, aimed at promoting agricultural processing products and connecting with the local tourism industry.
The government expects the SEC scheme will boost the local economy in southern provinces to expand more in the long run.