Prospects of oil palm development in Thailand
Creators: name: Theppuangtong, Yuenyong
Publisher: name: Canberra, ACT : The Australian National University
Year: 1985
Subjects: subject: Palm oil industry Thailand

description: Since oil palm was introduced to Thai agriculture in the late 1960s, the oil palm industry in Thailand has grown rapidly and has shown promise as a remedy for the domestic oils and fats crisis, and for the country's foreign exchange deficit. As oil palm gives high returns to investment, further expansion of the industry can be envisaged. However, development of the oil palm industry has been undertaken without a definite supporting policy from the government to facilitate progress. It is felt that involvement of the government is necessary for any further development of the industry. This is because world production of palm oil is expected to increase dramatically with both the rapid expansion of oil palm industries in the main producing countries and the improvement of production technology. It is, therefore, argued that the government should show concern by playing a more positive role in the provision of supportive activities for the industry in order that efficiency of production can be improved, and Thailand, as a palm oil exporter, can secure a competitive position in the world market. This study provides general information on the palm oil situation as a basis for policy formulation. It reviews of production and consumption of palm oil in the oils and fats economy, both internationally and domestically, and an evaluation of oil palm cultivation in Thailand. The high-yield characteristics of oil palm contribute to the high return to investment in the oil palm industry. Production of palm oil on a commercial basis has thus expanded rapidly in the last two decades, notably in Southeast Asia, where Malaysia dominates as the largest producer. Recently, the share of palm oil production increased to 9% of the total supply of major oils and fats. Produced from a perennial crop, the supply of palm oil has increased steadily with low flexibility to price fluctuations. Its share of the world market is expected to double by the year 2000. This suggests a fall in the price of palm oil in the long term. Parallel to the expansion of the oil palm industry, research into ways of improving productivity and the quality of oil palm is being conducted, led by Malaysia, in order to maintain profitability. Effective methods include the development of high-yielding varieties; reproduction of standard planting material through tissue culture techniques; the use of insects as pollinating agents, which is also labour saving; and improving methods of fertilization and chemical control. These methods are likely to be adopted widely in the near future. Palm oil is a low priced oil. It is primarily used in the manufacture of margarine, shortening and soap. Advances in refining technology, especially the fractionation process, makes palm oil substitutable for either saturated or unsaturated oils in various end-uses. This, coupled with its price advantage, encourages the widespread use of palm oil in many manufactures. Palm oil may even be used as a gasoline substitute. However, markets for palm oil are still limited. Processed palm oil confronts trade barriers in many countries, especially Europe, where refining techniques are advanced and crude oil is preferred. LDCs' markets are also limited by restricted income and, in some regions, traditional tastes and preferences. Promotion of more uses of palm oil is being conducted by leading producers, especially Malaysia. Palm oil is also consumed in Thailand. Shortages in the domestic supply of oilseeds, and a high cost of oil processing, have led to substitution with palm oil in many manufactures. Demand for palm oil has risen rapidly in recent years, and this has had an impact on domestic oilseed producers. Imported palm oil was then used to replace domestically produced oils, with the result that farm prices of oilseeds were reduced to unfavourable levels. Eventually, the government had to protect domestic producers by regulating the volume of palm oil imported. By and large, the rising demand for palm oil is explained by the shortage of coconut oil, rather than of soybean oil, for manufacture of edible products and soap. As the supply of domestic coconut oil is likely to have reached its maximuni, demand for palm oil is expected to increase steadily in the future. Supply of domestically produced palm oil in Thailand has not been sufficient to cope with the rising demand, as production is still in the early stages of development, and the quality of domestic palm oil has been inferior. Although most domestic production was consumed, it has been mainly used in producing soap and some edible products. Such limited use implies a need for improvement in oil palm cultivation to upgrade oil quality. Using an established model for prediction of oil palm output, it is estimated that output of domestic palm oil will exceed demand by 1987. This means that Thailand will be able to export the palm oil surplus in a few years. Output of bunches will also exceed the existing mill capacity, and expansion of mill capacity will also be needed. Most areas under oil palm in Thailand are under large-scale management. The rate of return to investment is around 24% with a nine-year payback period. Oil palm production on smallholdings has been shown to be economically efficient, but lack of technical knowledge and limited capital are major problems hampering the capacity of this sector of oil palm cultivation. Given Thailand's optimum "growing conditions, it is recommended that further development of the industry should be encouraged and that greater participation of smallholders is desirable. A definite development policy should be formulated, and supportive activities such as research on appropriate cultivation methods and provision of improved materials, as well as credit provision and improvement of infrastructure, should also be undertaken by the government.