06/08/2012 (The Nation) - Production plans should factor in cultivation patterns of Thai crops. Cabinet's decision to import 30,000 tonnes of crude palm oil must be monitored closely to ensure that oil-palm planters won't be adversely affected. After all, the import does not seem to be the perfect solution to solve the possible shortage of palm oil at home.

The import decision drew questions from many, especially from the oil-palm planters who are likely to be affected by fluctuation of prices because of imports.

At any rate, Thailand, one of the world's largest palm oil-exporters, should not face a shortage of palm oil. All parties involved should focus on the management of the domestic palm-oil supply to ensure a sustainable supply of crude palm oil throughout the year.

The government said it is necessary to import 30,000 tonnes this month to prevent a possible shortage, as current stock has declined to 130,000 tonnes, which the government claims is a critical level compared to the safety of having 200,000 tonnes. The government earlier this year imported 10,000 tonnes of crude palm oil.

However, the decision to import palm oil later this month may be a little late. Some questioned if it was necessary to import the palm oil now that around 500,00-600,000 tonnes of fresh nuts are set to be harvested late this month and next month.

Also, the government should not have to be burdened by palm oil imports. The Commerce Ministry said recently that the government would have to suffer a loss of Bt6 million for every 10,000 tonnes of crude palm oil it imports. In total, the government may have to set aside a total of Bt18 million to cover the loss of importing some 30,000 tonnes of crude palm oil. This is not to mention the margin cost between the imported crude oil and the price it is sold on the domestic market.

The import may help guarantee sufficient supply for palm oil extraction manufacturers for a couple of months by enabling palm oil extraction manufacturers to lay down a production plan based on the amount of palm in stock.

However, the oil palm planters are likely to be affected by a fluctuation in domestic prices as a result of a sudden supply of imports. They are likely to sell their produce at lower price.

Palm oil is an important economic crop because it is not only used for consumption but it is also an energy crop for bio-diesel. Market speculation and mismanagement of supply have at times, however, caused an abrupt shortage of palm oil on the market. The government was trying to solve this problem by capping the price of cooking palm oil at Bt42 per litre. But the price cap does not seem to ensure a steady supply of palm oil.

The government should find ways to import crude palm oil without incurring losses that affect the country's fiscal budget. In fact, there should not be loss because the imported palm oil should be cheaper than domestic produce.

Such market intervention is not shown to be a good solution to fix a possible shortage of palm oil. The government or agencies involved should instead focus on a sustainable strategy.

For instance, the palm oil production plan should be in line with cultivation patterns of the crop. Besides, the bio-diesel production method may be flexible and allow reduced use of palm oil during the low season to ensure a sufficient supply to produce cooking oil. The distribution of palm oil imports should also be fairly distributed to prevent market speculation, which may affect the customers and farmers