Free trade in palm oil solution to Thai shortages
By Jon Fernquest |
The front page of today's Bangkok Post business section takes a look at the removal of government import restrictions on the import of palm oil.
Economists typically recommend free trade as a solution for many economic problems and this time the problem seems to have been solved within a month.
Facing a shortage of palm oil, the Thai government changed regulations to allow imports of palm oil from abroad earlier this month.
Over the last two months palm oil shortages have led to price hikes in the cooking oil used to prepare food at home (see photo on right) and in restaurants thus leading to an overall increase in food costs.
The result of removing import restrictions has been a marked decrease in palm oil prices:
"In the few days after the imports were approved, local prices paid by producers for fresh palm nuts declined to six baht a kilogramme from 6.80 baht...Crude palm-oil prices have also declined from an average of 38-39 baht a kilogramme to 34-35 baht, slightly higher than the Malaysian market price of 32 baht, he said."
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"The industry is facing major challenges because of fast-rising demand for palm oil to produce B100 (100% biofuel) to make B2 biodiesel, a blend of 2% biofuel and 98% diesel. Authorities are adamant that B2 will replace all conventional diesel starting next month."
Several Thai companies are targeting this new lucrative market, including Ta Chang Industrial Group:
Ta Chang is interested in investing in the production of B100 since the government is promoting biodiesel so vigorously. For now, the company's alternative energy focus is a biogas venture worth 80 million baht.The company will recycle waste from its manufacturing complex to create biogas to generate 1.4 megawatts of electricity, with plans to expand capacity to 2MW, with an additional outlay of 25 million baht.
Also in the pipeline is a biomass energy project that would cost 250 million baht and should break even in three years. All of the projects are aimed at reducing production costs, as well as emissions from manufacturing.
As well as Chumporn Palm Oil Industry Plc:
Karun Nantileepong, managing director of Chumporn Palm Oil Industry Plc, said his company had invested 80 million baht in a project to use waste water to generate electricity, with funding supported by the state-backed energy service companies (Esco) programme.Inter Rubber Latex Co is also interested in producing biogas from waste water released from its latex production process. It plans to install facilities and equipment worth 35 million baht, which will help cut its power bill by 20%, or 200,000 baht per month from an average of one million baht. The entire project will be completed in two years.
Outgoing Energy Minister Piyasvasti Amranand estimated that the value of electricity produced from waste could reach 5.4 billion baht within five years.
For further reading check out a stunning slide show on Malaysia's palm oil industry featured in the New York Times last week and a visual slide essay on palm oil in India.
Also check out previous Bangkok Post articles on the oil and energy sector.
The difficult conundrum to solve seems to be how poor countries in Africa, for instance, can generate needed income from palm oil which just used to be a cheap commodity at the same time as ensuring that the poor people who live in these countries can still afford palm oil for everyday food needs.
Can a country have both cheap food resources and generate wealth from those food resources at the same time?
(Source: Bangkok Post, Business, 28-01-08, temp-link)
Vocabulary:
price hikes - price increases
marked decrease - a significant decrease, a large and noticeable decrease
palm nuts - the of the oil palm from which palm oil is extracted (See pictures on right and Wikipedia on oil palm and palm oil)
crude palm-oil - palm oil before being refined or processed, transformed into a product to be sold
alternative (adjective) - can be used instead of something else
biofuels - fuel from biological materials (biomass) such as sugar cane or corn that helps reduce climate change and reduces dependence on oil (See Wikipedia on biofuels and energy crops)
biodiesel - biofuel substitute for diesel commonly used in commercial vehicles, the most common biofuel in Europe and also experiencing phenomenal growth recently in the US (See Wikipedia on biodiesel and articles on biodiesel)
adamant - have a very strong opinion about something that they will not change
targeting X - aiming at X, making X into a goal for the future
lucrative - profitable
lucrative market - a profitable
vigorously - with great energy
a venture - a new project or business which is exciting and difficult because it involves risk
recycle - process things such as old cans, bottles, or newspapers so that the plastic or metal can be used again,
break even - make neither a profit or a loss, revenue - expenses = 0, which is the initial target for a business just starting that still running a loss (See glossary)
emissions - the release of smoke and chemicals from the back end of automobiles into the air and atmosphere
state-backed - supported financially (with money) by the government
outgoing - leaving political office after appointed term finished
a conundrum - a difficult puzzle or problem to solve
