18/04/2012 (Bangkok Post) - The cabinet has approved a plan to import up to 40,000 tonnes of crude palm olein (CPO), but only a quarter of the total will be allowed initially.

Palm planters in southern Thailand have complained that there is not a shortage of palm oil, rather that the price is climbing in the world market due to high demand.

The National Policy Committee for Palm Oil will consider the impact of imports on farmers before allowing a second lot of 10,000 tonnes.

There was disagreement at a recent meeting between government agencies and the Thai Oil and Palm Oil Association because of concern about the impact to the domestic market. The association wants the government to lift the capped price of 42 baht for a one-litre bottle of palm oil, said Chalirat Chandrubeksa, a deputy government spokesman.

However, small farmers finally agreed that an appropriate level of imports might not affect domestic farmers, leading to the decision on phased imports of CPO.

The Agriculture Ministry has estimated that 876,100 tonnes of fresh palm nuts will be harvested in Thailand this year, 270,000 tonnes below the target.

As of the end of April, stocks were projected at 150,000 tonnes, while the safety stock should be 200,000 tonnes.

The Commerce Ministry has also said that it needs to import CPO to maintain domestic palm cooking oil prices at 42 baht a litre.

A severe shortage last year led the ministry to import 60,000 tonnes of CPO, with the government paying 213.78 million baht to maintain the price at 47 baht a bottle.

Manit Wongsureerat, president of the Trang Oil Palm Farmers Association and manager of Trang Palm Oil Co, said its members were discussing their position as this year differs from last year. There is no shortage this year and demand for CPO in the world market is driving the price.

"Consumers may use a bottle of palm oil a month, so a price increase by 10 baht has no impact to living costs. The government's decision to reduce subsidies for diesel will have a greater impact on the cost of living," said Mr Manit.

"We are importing to maintain the price at 42 baht even while exports of CPO continue. It's funny because importing will lead to a surplus in domestic production, resulting in a weaker price for local CPO, and CPO will ultimately be exported because it fetches a more attractive price abroad."

He added importing will not solve the problem as the government has to acquire CPO at a high price and sell at a loss to refiners. A better solution to maintain prices would be direct compensation to refiners, allowing fresh palm nuts to be sold at free-market prices, said Mr Manit.