Oil back on shelves

Consumers can once again select from a normal range of vegetable oils, following the disappearance of some brands from the shelves and the Commerce Ministry's decision last week to allow palm-oil producers to increase retail prices Bt4 per litre bottle.

The new price of palm oil is Bt47.50 per bottle.

The hike was approved on Friday after producers asked the ministry to agree to an increase of Bt8.50 a bottle. They said manufacturing costs had increased significantly and the existing retail price of Bt43.50 no longer covered production costs.

Last week's Bt4 increase followed a rise from Bt38 to Bt43.50 a bottle allowed by the ministry last year. It said it would not allow the price of palm oil to increase again within the first half of this year.

The ministry also said it would not approve any further increases in prices of consumer goods to ensure that consumers would not suffer more from rising costs of living.

"The ministry had to allow palm-oil prices to increase because the cost of crude palm oil had jumped significantly over the past month. However, it has no plans to allow other goods prices to rise now," said Internal Trade Department director-general Yangyong Phuangrach.

Other products awaiting the ministry's approval for price hikes include dairy products and construction materials such as steel and cement.

The cost of crude palm oil has risen from Bt34 to Bt37 per litre so far this year. The cost has continued to be driven up by rising oil prices despite the government allowing 30,000 tonnes of crude palm oil to be imported last week to overcome a shortage for manufacturing cooking oil.

Yangyong said if the ministry had not approved the importing of palm oil, the price of domestic crude palm oil would have surged to Bt37 a litre. This would have hurt more consumers as costs of production would have affected the raw-material costs of many products.

Soy Oil and Rice Bran Oil Processors' Association president Sethasan Sethakarun said soy oil manufacturers had also asked for the ministry's approval to increase their retail prices because the price of soybeans had risen from Bt10 to Bt19 a kilogram since the beginning of the year.

The price of soy oil will continue to gradually increase because of high demand for fuel crops, including soy and palm oil, he said.

Despite increasing costs of production, vegetable oil manufacturers are benefiting from rising edible oil prices. In a research note yesterday, Tisco Securities said it expected one major producer, Thai Vegetable Oil, to maintain its prosperous performance.

Its stock has climbed 14 per cent this month despite the Stock Exchange of Thailand Index falling 11.5 per cent.

"We expect Thai Vegetable Oil (TVO) to continue to outperform in the near term, given the price uptrend in soybean and derivative products and the likelihood of Commerce Ministry approval for another rise in domestic soybean oil prices," it said.

At Tisco's corporate day last Thursday, TVO's management expressed confidence in the company's earnings outlook for 2008. It explained that prices for soybean products were being driven by rising consumption of meat and vegetable oil in India and China as well as growing global demand for biofuels. To capitalise on this strong demand, TVO is now considering boosting its crushing capacity by 2,000-3,000 tonnes per day.

Although investors were concerned about a possible collapse of soybean product prices, particularly if the US went into recession, TVO's management said it could reduce the risk by hedging in the futures market and more efficient control over inventory.

Meanwhile, the US Agriculture Department has again raised its price forecasts for soybean and derivative products.

Tisco expects TVO to post net profits of Bt1 billion for last year and Bt1.28 billion this year.

Petchanet Pratruangkrai

The Nation