11/04/2006 ( Food Navigator.com) - Palm oil prices in Thailand could rise this year, if the country uses greater amounts of the vegetable oil in new biodiesel plants.

The ingredient, which is widely used in the food industry in margarine and other fat-based products, as well as for deep frying snack foods, is seeing rising demand in most Asian markets as consumption of processed foods rises.
Almost all of the oil is produced in Malaysia and Indonesia but Thailand does have some domestic production and wants to increase this to raise production of biodiesel in a bid to offset its vulnerability to high crude oil prices.

Its production of biodiesel is expected to reach 160,000 litres per day by the end of this year, the energy ministry told The Nation newspaper last week, and with new plants planned for 2007, the industry is set to require 2 million tonnes of palm oil per year.

Yet it is only expected to produce an estimated 5.7 million tonnes of fruit this year, yielding about 700,000 tonnes of oil, according to the Agriculture Ministry.

The Energy Ministry said it would not import palm oil to meet growing demand but would promote local production by providing technical support and advice.

But in an interview with Reuters, Krisada Chavananand, head of the Palm Oil Crushing Association, said that no palm-based biodiesel plants have been built since Thailand announced last year that it planned to up its biodiesel output.

Krisada said reaching the planned 2007 target of 300,000 litres of palm-based biodiesel a day would mean an additional 640,000 to 800,000 hectares of palm plantations and no such land development has been made yet.

Furthermore, the palms are grown in the south, where they compete with rubber, a crop that has seen its price double in the past few years. In comparison, palm oil could not be sold for more than 15 baht a litre or it would make biodiesel less competitive than diesel, he said.