Thailand races to compete with Asian palm oil giants
industry is set to become far more competitive. It is common
knowledge that the Indonesian palm oil industry is gearing up for
increased production, but now Thailand is joining the competition
after its agricultural ministry announced plans to develop vast
tracts of land previously devoted to rubber plantations.
According to a report in the Bangkok Post the Agriculture Ministry is going back on its original plans to develop rubber plantations in the country, and is now refocusing on the growing palm oil sector. The Government says that it wants to increase palm cultivation from two to 10 million rai (1 to 5 million acres) within the course of the next 25 years.
In recent months the Thai government has spent THB1.4 billion (€28.4m) buying up some 90 million rubber tree seedlings, but contrary to that plan Agricultural Minister Somsak Thepsuthin has called on rubber farmers to help the government in its short-term plans to increase palm plantations to 3.6 million rai in the course of the next five years.
As an incentive the Government says that it will pay rubber farmers who switch to palm oil production an average of THB6,800 per rai. The ministry wants to increase production to meet domestic demands for bio diesel, but the longer term plan is to become a bigger player in the international market, where it would have more scope as a supplier to the food industry.
Palm oil more profitable and healthier
Somsak said that planting palm trees would prove more profitable than cultivating rubber in the long term, as it would meet growing world demands for the crop. In particular the food industry is showing a marked sign towards switching to palm oil. In recent years supplies of other edible oils - soy bean in particular - have proved volatile after being hit by rising demand and poor crop yields. Palm all on the other hand is easy to grow and crop yields are generally very steady.
Palm oil is also said to be low in trans fatty acids. With trans fatty acids increasingly being blamed for the rise in global obesity many leading multinationals food companies are starting to switch over to palm oil in the race to reduce the content in processed foods. Indeed, earlier this year Kraft Foods announced a major initiative to cut back on trans fatty acids in its foods, a move that is expected to be backed by increasing use of palm oil.
Thailand set to become major player?
In a recent interview with the Malaysian Palm Oil Promotion Council, Zainuddin Hassan told ap-foodtechnology.com that the biggest threat to Malaysia's leading position on the global palm oil market was Indonesia. However, as Thailand ramps up its production it is now expected to elevate its position as one of the world's leading suppliers.
In the Asia-Pacific region Thailand is currently the third biggest palm oil producers, but is still way behind leading producers Malaysia and Indonesia in terms of output. In the course of the past ten years, the country has managed to more than double annual production to around 6 million tons, representing an annual growth rate of 9.5 per cent which has largely been bought about by rubber plant farmers in the south of the country switching over to palm oil production.
In Indonesia growth over the past ten years has averaged 10.7 per cent, representing an annual production of around 90 million tons, compared to Malaysia where growth has averaged 6.4 per cent to currently stand at 120 million tons. Although Thailand's production figures look relatively feeble in comparison, with total palm oil plantation coverage set to increase five-fold and many other plantations coming into full production in the course of the next few years, growth looks set to be massive.
Meeting processing demands bought about by this growth is major palm oil producer Thai Palm Oil Company, which, in conjunction with the Thai government's announcement to expand production this week, confirmed that it is set to double production capacity to meet increasing domestic and export demand.
The company said that currently domestic demand for palm oil was growing at up to 10 per cent a year, growth that is expected to be sustained in the coming years. In view of this the company has decided to build a new palm oil refinery at a cost of THB420 million, which is expected to boost production capacity from 300 tons a day to 600 tons a day once the facility is up and running at the end of 2005.
