Palm Oil Industry Urges Price Hikes

September 3, 2012

The Thailand palm oil industry is strongly urging the government to allow free-market retail pricing after the price-freezing ends this month. Palm oil producers and sellers are losing money since the fixed prices do not cover their costs, they said.

The retail price of palm oil would rise from 42 to 45 baht a bottle, under a proposal from Thailand’s palm oil industry. Palm oil is one of 42 consumer products whose prices are determined by the Ministry of Commerce, as part of the government’s flagship strategy for reducing the cost of living.

Mrs. Wiwan Boonyaprateeprat, the general secretary of Thailand’s palm oil and oil palm association, begged the Ministry of Commerce to use a floating price structure that is related to the budget, after the period of cooperation of freezing prices of consumer goods ends in September.

When the price is allowed to float, a bottle of palm oil would rise in price from 42 to 45 baht per bottle. Mrs. Wiwan believes that the price will not be raised much, because palm oil production is enough for domestic consumption.

In fact, Thailand has a surplus of palm oil, which it exports. Of Thailand’s current stock of 2.1 million tons of palm oil, only 1.5 million tons is used for domestic use per year.

The previous price fixing has caused the oil refineries and distillation factories to bear higher costs without being able to raise prices, she said. To avoid the problem, government should let the prices reflect their true cost.

Mrs. Wiwan said the government is making a mistake by fixing the price of palm oil, which does not reflect the costs of producing and distribution. To continue the price fixing will only cause the problem to recur for Thailand’s farmers and manufacturers.