11/07/2012 (Bangkok Post) - Palm oil producers are warning the government to apply proper strategy in managing palm oil inventories to avoid hording despite the lack of a shortage.

Wiwan Boonyaprateeprat, secretary-general of the Thai Oil Palm and Palm Oil Association, said there is no shortage despite the peak harvesting season having been delayed until next month due to drought and production in the southern region was likely to drop by 20% this month. Fresh palm nut has risen to 6.10 baht a kilogramme.

Thailand's crude palm oil (CPO) inventory stood at 176,000 tonnes in May, lower than the government's safety stock level of 200,000 tonnes. Imports are needed to meet the safety stock level, and with local crude palm oil priced at 35-36 baht a kilogramme, exports are unlikely with 31-32 baht a kg being offered in other countries.

Local palm oil refineries are unwilling to produce bottled palm oil, which has its price capped at 42 baht per one-litre bottle, because at this price, the CPO should be 30 baht a kg and fresh nut 4.20 baht a kg. Producers have turned to making palm oil soft packets and buckets.

She added the government should compensate producers for bottled palm oil. For example, for domestic consumption of 30,000 tonnes or 30 million bottles, if the difference in price is five baht a bottle, 150 million baht is needed.

"Hedge funds are speculating on palm oil, so the government should swiftly manage the commodity to match the situation and price fluctuation," she said.