12/01/2008 (The Bangkok Post) - Charoen Pokphand Group, the country's biggest agro-industrial conglomerate, plans to start producing palm oil over the next three years to capitalise on rising domestic demand for the commodity, driven by its increased use in both cooking and biofuels.

According to Montri Congtrakultien, president and CEO of the group's Crop Integration Business Group, CP is preparing to invest at least 600 million baht in the oil-palm business under a three-year plan, starting this year.

The company plans to plant oil-palm trees this year on 4,200 rai of its own land in Nakhon Si Thammarat, Songkhla, Ranong, Saraburi and Kamphaeng Phet. It also aims to expand the plantation area through contract farming to 25,000 rai a year in the first three years, and increase it to 50,000 rai a year from the fourth year onwards.

''We have set a target to have the oil palm plantation area under the contract farming to 200,000 rai within 10 years,'' said Mr Montri.

According to its executives, the company is planning to invest at least 70 million baht this year to produce palm seeds to accommodate future expansion.

It has already developed its own palm breed called ''CP Golden Tenara'', which is claimed to produce about four tonnes of palm nuts per rai or about 800 litres of palm oil per rai.

As part of the investment plan, the company would set up biodiesel business units in three strategic locations, requiring an investment of about 200 million baht each.

The first unit is planned in Nakhon Si Thammarat to process the output of the lower South, with the second one in Chumphon to handle the output in the upper South. The third unit will be built in Saraburi to process the output from the central region.

Each unit would consist of a dumping yard, a crushing plant, a biodiesel refiner and either a one-megawatt power plant or a gasifier.

A gasifier is expected to require an investment of about 50 million baht, while a biodiesel plant needs about 80 million baht, he said.

According to the company's executives, the biodiesel plants are expected to begin production over the next four years, with the output slated to be sold to oil companies.

If the palm-oil business proves successful, the company will expand the investment in the palm business into neighbouring countries such as Laos, Cambodia, Burma and Vietnam, said Mr Montri.

Rising demand has pushed up the prices of local fresh palm nuts significantly, to around five baht per kilogramme now from just two baht in 2006.

Citing a forecast by Malaysian authorities, the group's executives said the price of fresh palm nuts would rise to 6.30 baht per kg in 2010.

''We believe the palm plantation areas would increase to more than 10 million rai in the future,'' said Mr Montri. ''Local daily biodiesel demand of about 55 million litres today means we need to plant up to 25 million rai of palm trees.''

Palm trees now account for three million rai of the country's total cultivation area of 130 million rai.

According to Mr Montri, the crop integration business unit generated revenue of 4.2 billion baht last year, with growth forecast at 10% this year on rising crop prices. Exports, mostly from maize seeds and fruit, make up 25% of the company's revenue.

In a related development, CP Land, another CP Group affiliate, said yesterday that it planned eight developments worth more than six billion baht, including an industrial estate in Rayong where it has a land bank of 3,000 rai.

With an investment of 6.7 billion baht, construction would start next year and be completed within four years, said president and chief executive Sunthorn Arunanondchai. The auto parts industry will be the main target.

''Rayong's economy is growing rapidly, as it is home to many factories. People in the area have an annual income of about one million baht on average, higher than those in Bangkok,'' said Mr Sunthorn. The company plans talks with the Board of Investment for promotional privileges.

The subsidiary will also develop an office building for rent in Khon Kaen, two detached-housing projects in Nakhon Ratchasima and Min Buri and three condominiums: in the Bang Na-Trat area, North Park on Vibhavadi Rangsit Road, and in Pattaya.

CP Land expects a net profit this year of between 300 million and 400 million baht, similar to last year, and presales of three billion baht from two condominiums.