21/12/2012 (The Nation) - The government is budgeting up to Bt1.9 billion to shore up the oil-palm price by buying about 100,000 tonnes of kernels at Bt4-Bt4.5 per kilogram, depending on oil content.

Apichart Jongskul, secretary-general of the Agricultural Economics Office, said yesterday that the National Palm Oil Policy Committee's resolution to buy the palm kernels took effect immediately, after the days-long protest by more than 3,000 palm growers in Surat Thani.

Upon hearing the good news, those blocking a highway in Chumphon quickly agreed to |disperse.

Apichart told Krungthep Turakij TV that the committee's meeting chaired by Deputy Prime Minister Kittiratt Na-Ranong agreed that the Public Warehouse Organisation would work with palm-oil-extracting plants.

They will buy kernels at the specified price and then the oil will be sold to the organisation at Bt25 per kilo.

The Commerce Ministry will then work out what to do with the oil. This should absorb some excess supply and put upward pressure on prices.

Bt1.9-bn budget

"The budget might not be as high as Bt1.9 billion. The exact cost of this is Bt25 per kilogram, or Bt25,000 per tonne, plus some administrative costs," Apichart said.

About 800,000-900,000 tonnes of palm kernels will be harvested, enough to produce 150,000-160,000 tonnes of crude palm oil.

Extraction plants and refineries are sitting on 340,000 tonnes of inventory, against the normal level of 200,000 tonnes.

"The meeting discussed at length how to release the stocks as soon as possible, as with the stocks factories cannot buy up new crops, and that leads to falling prices," he said.

Stocks will remain high, given excess global production. Indonesia and Malaysia also hold huge inventories.

"We need to reduce the stocks as soon as possible. The oil could be burned to generate electricity. This is what we are working on. Palm prices might not move up fast, but we will try to keep the price above Bt4 per kilogram," Apichart said.