Oversupply saps sales of palm oil fruit

Farmers load palm oil fruit for a run to the market. Prices are down everywhere from farms to markets, and the government believes it could be because of an oversupply. (File photo by Seksan Rojjanametakun)

A decline in the price of palm oil fruit was not caused by market manipulation but an oversupply, the Commerce Ministry says.

Nuntawan Sakuntanaga, chief of the Department of Internal Trade, said officials had investigated the falling price and found that supply outweighs demand.

Palm fruit growers are calling on the ministry to determine the cause of the price drop out of concerns about market speculation by traders after the price of palm nuts plunged.

Over the past two months the price slid from 5 baht per kilogramme to between 3 baht-3.50 baht/kg. The production cost is estimated to be 3.80 baht/kg.

According to Ms Nuntawan, compared with the same period last year, the output of palm fruit from April to June this year has gone up.

In April, production rose by 20.7% while the May output shot up by 35.36%. Production in June increased by 26.1%.

She said the price of palm fruit may drop further because demand is unable to absorb supply.

In addition to abundant stocks of palm oil by refineries and producers of bio-diesel, sales of cooking oil are also sluggish despite a drop in prices to 34-26 baht per unit, she said, noting that refineries are not interested in buying crude palm oil.

Moreover, those with abundant stocks of palm oil are expected to release them and possibly push the oil price lower and affect the price of of palm nuts in the process, she said.

The department chief said several measures have been taken to tackle the tumbling price, especially in the area of management of supply to avoid a surplus or an abrupt shortage. The efforts involve several state agencies. Among them is a monthly survey of stocks of palm oil at refineries, biodiesel manufacturers, depots, and wholesalers and retailers.

The information is used to better manage the stocks and prevent a fluctuation in prices.

Based on findings which show huge stockpiles, the Commerce Ministry has sought help from the Energy Ministry’s Department of Energy Business to increase the proportion of palm oil used in making biodiesel from B5 to B7.

B5 biodiesel is a blend of 5% refined palm oil or palm methyl ester (PME) and diesel while B7 is a blend of 7%-PME diesel.

She said a subcommittee chaired by the commerce minister on the management of palm fruit and palm oil has also agreed to increase yields to 3 tonnes per rai, from 2.5 tonnes, and promote growing of high-yield palm nuts with at least 18% oil content.

Palm nuts with 18% oil content can increase earnings by 300 baht per tonne.

She said provincial governors are being asked to support the programme by setting up a working committee to monitor the sale of palm fruits to ensure the growers get a fair price.

The Agriculture and Cooperative Ministry was also brought in to encourage palm fruit growers to grow high yield crops and reduce the cost of production while the Office of Agricultural Economics was urged to expedite a national strategic plan to revolutionise the palm oil industry.

The strategic plan includes rolling out industry standards and pushing for the enforcement of a law on the industry.

The Department of Energy Business was asked to encourage the industry to increase reserves from 13 million litres to 68 million litres in June, 90 million litres in July and 120 million litres this month.

The Customs Department was also approached to step up a crackdown on illegal imports of crude palm oil which can drive the price down.

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