The government yesterday agreed to buy palm nuts from farmers at four baht a kilogramme for nuts with 17% oil content.
Farmers will also be given a three-month grace period to adjust before the government tightens up on quality and bans trading palm nuts with oil content of less than 17%.
Commerce Minister Chatchai Sarikulya, who chaired a meeting of a panel tasked with oil palm and palm oil management, said a long-term plan to overhaul the entire palm price structure was approved.
But to tackle short-term price declines, refineries and crushing mill operators will cooperate with a government request to buy fresh palm kernels with 17% oil content from farmers at four baht per kg, he said.
They also agreed to increase their purchase price by 30 satang for each 1% increase in oil content.
For instance, for palm nuts with 18% oil content, refineries and crushing mills will pay 4.30 baht per kg.
But for 16% oil content, the purchase rate will be 25 satang lower at 3.75 baht per kg, while 15% oil content will be paid at 3.50 baht.
Palm nuts with oil content of less than 15% will not be purchased.
Gen Chatchai said to facilitate the purchase, the ministry had assigned the Public Warehouse Organization to help buy palm nuts from farmers.
"Palm nuts with oil content of below 17% are considered substandard," he said. "After the three-month grace period, selling palm nuts with oil content of less than 17% will be illegal."
Deputy Agriculture Minister Amnuay Patise said most Thai palm nuts contained 18.26% oil content on average but admitted a small proportion had less than 17%.
In a bid to absorb oversupply and shore up domestic palm oil prices, the government on April 20 agreed to double the volume of palm oil blended into diesel, reversing a cut made at the start of the year.
In January, the government halved the proportion of palm-based B100 biodiesel for retail sale to 3.5% to spare the crude palm oil supply and prevent a shortage in the food industry at a time when domestic production was in seasonal decline.
The policy reversal is expected to increase crude palm oil use by 70,000 to 80,000 tonnes a day.
Also in January, the committee approved a plan to import 50,000 tonnes of crude palm oil to guard against a shortage of retail cooking oil on store shelves.
Palm fruit production tumbles from December to February, when the weather reduces the stocks for both food and biofuel.
