12/03/2012 (Bangkok Post) - Palm oil producers are urging the government to speed up restructuring of the commodity's price management before history repeats itself and shortages return, says the Thai Oil Palm and Palm Oil Association.

Secretary-general Wiwan Boonyaprateeprat said the price of fresh palm nut has started to rise to about six baht a kilogramme, in line with the global increase in energy prices, from 3-4 baht earlier.

The high price of raw materials resulted in crude palm oil trading at 36.28 baht a kilogramme last Friday.

Based on this price, cooking palm oil should go for 47 baht a litre.

Ms Wiwan said palm oil refineries and cooking palm oil producers would like to suspend production, as it no longer makes economic sense with the government capping the price of cooking palm oil at 42 baht a litre.

"Some producers don't want to make cooking oil any more, as the government does not offer a fair price," she said.

Thailand still has high levels of crude palm oil stock _ 270,000 tonnes at the end of January _ much higher than the 70,000 tonnes early last year when the country faced a shortage.

The government considers a safe level of stock to be 200,000 tonnes, so the local industry has tried to export the extra output, the result of a good harvest from last year until now.

The country exported 331,710 tonnes of crude palm oil last year, up from 66,001 tonnes in 2010, while exports of refined palm oil were 50,137 tonnes.

Mrs Wiwan said if the government fails to restructure the price system, then more oil will be exported, as the industry will get a better price abroad.

Malaysia predicts the price of crude palm oil will rise to 40 baht a kilogramme in June.

The result would be speculation and hoarding despite the prospects of a good harvest year of 11.6 million tonnes, which translate into 1.97 million tonnes of crude palm oil.

Earlier this year, the country had 290,000 tonnes of carried-over stock of crude palm oil, bringing total supply to 2.26 million tonnes.

Domestic demand, however, is estimated at 1.57 million tonnes _ 1 million for consumption and 0.57 million for biodiesel production _ leaving a large amount prime for exports.

"If the government is not flexible in its policy, then there may be a hoarding problem," she said. "The government should consider farmers' costs and add a 30-50% profit for them. It should also allow for price increases in line with rising raw material prices."

With a clear pricing structure, consumers will understand the situation and be prepared, noted Mrs Wiwan.

"A meeting should be called urgently to avoid shortages," she said

Vatchari Vimooktayon, director-general of the Internal Trade Department, insisted there is no shortage but conceded the prices of fresh palm nut and crude palm oil have risen.