Sep 30, 2008

State help sought for cassava glut

Feed industry urged to use more tapioca

Walailak Keeratipipatpong sep. 26, 2008. Local tapioca manufacturers say the government should buy at least five million tonnes of cassava from the new crop in order to stabilise prices that are expected to fall in a slowing market.

Industry surveys conducted last week found that local cassava production from the 2008-09 crop would be 29.15 million tonnes, a rise of 15% from the previous crop, as a result of larger plantations and higher yields.

Favourable prices last year driven by the ethanol craze have induced planters, raising the harvesting acreage this year above eight million rai, from 7.39 million a year earlier. In addition, the average yield per rai has improved to 3.64 tonnes from 3.4 tonnes, according to the Thai Tapioca Trade Association.

Chen Wongboonsin, the association's president said that in recent discussions with the Commerce Ministry's Internal Trade Department, planters and manufacturers agreed that tate intervention was necessary to prevent a price slump.

Farmers are worried that slowing demand from Europe and lack of clarity in the Thai government's ethanol policy could push down cassava prices. The root is currently fetching 1.70 to 1.80 baht per kilogramme, down from 2.70 baht early this year.

They have proposed that the government buy surplus output of around five million tonnes, at prices between 1.90 and 2.20 baht per kilogramme.

The Internal Trade Department will consider appropriate pledging prices to minimise the effect on export prices and on the government budget.

According to Mr Chen, tapioca pellet exports to the 27 countries of the European Union, the largest buyer, are likely to decline as EU grain production this year is up 25% to 304 million tonnes.

In the first eight months of 2008, the EU bought about 1.4 million tonnes of pellets from Thailand to use in livestock feed, about 500,000 tonnes higher than in the same period last year. A severe drought in the EU last year contributed to brisk sales of Thai tapioca pellets in the first half of this year.

Mr Chen said he was confident that with state intervention, the market would remain healthy thanks to more demand from the local animal feed industry. It is estimated that the industry will use as much as two million tonnes of pellets to mix with soybean meal, resulting in the equivalent nutritive value of maize.

As well, non-EU buyers that include South Korea, the Philippines and Indonesia are significant markets that could together import up to 500,000 tonnes of pellets from Thailand next year.

Despite the decline in imports of tapioca chips from Thailand this year, China is expected to remain a big customer for the product, use largely in its alcohol industry, as world maize prices are on the rise, reflecting a forecast drop in US production.

He said that tapioca demand from the native and modified starch industries also remained strong, estimated at 15 million tonnes of roots next year. As well, the opening of two or three new ethanol plants next year would drive demand to at least two million tonnes of cassava per year.

Currently, there is one ethanol plant that uses cassava, with annual demand of 300,000 to 400,000 tonnes.


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