Palm Oil Strategy Requires Reconsideration

Thailand's palm oil export strategy needs to be reviewed to keep it current based on global conditions, says the Internal Trade Department's chief.

The global oil palm outlook is gloomy after the EU's intended ban on palm oil, said Whichai Phochanakij, director-general of the Internal Trade Department.

Mr. Whichai says a potential EU ban on palm oil must be mulled.

The European Parliament caused an outcry among palm producers in Asia when it called in January for a total ban on palm oil use in automotive fuel.

A 2015 study funded by the European Commission found palm oil and soybean oil had the highest indirect greenhouse gas emissions because of the deforestation and drainage of peatlands associated with their cultivation.

Palm oil has increasingly been used as a feedstock for biofuels because it is cheaper than locally produced rapeseed oil. Half of the EU's €6 billion (223 billion baht) worth of palm oil imports are used for biodiesel, according to data from Copenhagen Economics.

The intended ban is part of a broader legislative package aimed at reducing greenhouse gas emissions in the EU by at least 40% below 1990 levels by 2030. This is part of the bloc's commitment to the Paris Agreement, which aims to keep global warming well below 2 degrees Celsius compared to pre-industrial levels.

Mr Whichai said the world's palm oil market has a glut, with Indonesia maintaining excess stocks of 4.3 million tonnes, Malaysia 2.5 million tonnes and Thailand 400,000 tonnes.

"Thailand's 20-year palm strategy needs to be revised," he said. "We need to focus more on increasing productivity and reducing production cost in limited plantation areas."

Domestic consumption should primarily focus on serving the energy sector, such as production of E20 gasohol, a 20% ethanol blend with 80% petrol, as well as power plants, said Mr Whichai.

Thailand's oil palm plantation covers 5.09 million rai. Thanks to decent rainfall this year, oil palm production is estimated to reach 15.3 million tonnes this year, up from 14.2 million last season. This has led to the price for fresh palm kernel falling to an average of 2.80-3 baht per kilogramme, with an average production cost of three baht.

Oil palm production is expected to continue increasing next year because of good weather and appropriate rainfall.

However, Mr Whichai said the government is accelerating its efforts to tackle tumbling palm oil prices. The cabinet in the middle of last month approved the Agriculture and Cooperatives Ministry's proposed measures intended to help shore up palm oil prices.

Source: Bangkok Post