14/02/2011 (Bangkok Post) - The Commerce Ministry will seek a budget of one billion baht to subsidise prices of palm oil sold to consumers as shortages continue.

Palm oil has been in short supply locally for three months, due manly to the impact of floods late last year of many palm plantations. The government has tried to ease the shortage by importing crude palm olein from Malaysia, but flooding in the past two weeks has also affected output in that country.

As a result, the cost of recent imports from Malaysia has risen to US$1,300 a tonne. That would bring the price of a one-litre bottle of cooking plam oil to 54.90 baht - well above the capped price of 47 baht.

Bottled palm oil made from local fresh palm nuts, which now fetch 6.50 to eight baht a kilogramme, would have to be sold at 63.20 baht for producers to cover their costs.

A ministry official said some oil producers had suspended operations after facing losses. The ministry needs to compensate processors so they can sell at the capped price and continue business.

The subsidy might be needed for about a month, he said, adding farmers would be paid a guaranteed price of six baht a kilogramme for palm nuts.