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\hypersetup{pdftitle={How to Improve Benefit from and Increase Production of Palm Oil in Thailand?},pdfauthor={Olesya Shurmeleva, Harald Grethe},pdfsubject={Tropentag 2010: Abstract},pdfkeywords={Biodiesel, certification, cointegration analysis, CPO, international trade, market integration, palm oil, price transmission, sustainability, Thailand, Vector-Error Correction Model},pdfpagemode=None,colorlinks=true}
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\parbox[b]{13.4cm}{\centering \large{\textbf{Tropentag, September 14-16, 2010, Zurich}}\\[1ex] \Large{``World Food System  ---\\A Contribution from Europe''\\[2ex]}}
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\begin{center}
\Large{\textbf{How to Improve Benefit from and Increase Production of Palm Oil in Thailand?\footnote{\textbf{Contact Address:} Olesya Shurmeleva, University of Hohenheim, Stuttgart, Germany, \mbox{e-mail}: \email{shurik.ole@googlemail.com}}\\[0.8ex]}}
\normalsize{\textsc{Olesya Shurmeleva$^{1}$, Harald Grethe$^{2}$}}
\end{center}
\begin{itemize*}
\item[]{\small{\textit{$^{1}$University of Hohenheim, Germany}}}
\item[]{\small{\textit{$^{2}$University of Hohenheim, Department of Agricultural Policy and Agricultural Markets, Germany}}}
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\index[author]{Shurmeleva, Olesya}
\index[author]{Grethe, Harald}
\begin{center}
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\textbf{Abstract}
\begin{abstract}
\normalsize{
The economy of Thailand is export oriented, and also its trade policy is influenced by this fact. Thailand is the largest rice and dried cassava exporter in the world and the third largest exporter of refined sugar and palm oil. Also within the country palm oil has a high importance as food crop and since 2007, it is also used for domestic biodiesel production. 



The world demand for crude palm oil (CPO) is increasing. Higher demand means higher prices; but only if there is a good price transmission from international to domestic and regional markets, farmers are profiting from these high prices and are stimulated to increase palm oil production, which potentially would stimulate export. 



This article examines whether the governmental influence prevents price transmission between domestic and international markets as well as between the border and selected regions. To do so, price transmission of CPO and biodiesel prices was analysed econometrically with the help of cointegration analysis and Vector Error-Correction Models.



Price transmission analysis showed that in general the domestic market is integrated into the world market and domestic biodiesel and CPO markets are cointegrated as well. Mills were found to have a certain level of market power, as in the long run only about \mbox{50\,\%} of price changes in CPO wholesale prices were transmitted to the farm level. Also cointegration between CPO-wholesale-Bangkok"=prices and prices of fresh fruit bunches in Krabi province was only found at the \mbox{90\,\%} level of correct prediction. So farmers in Krabi could not fully benefit from high CPO prices during the past years. This decreased their incentives to expand production according to the governmental plan and the expected growing demand for CPO. Thus, Thailand might face problems reaching the designed levels of CPO output in the coming years. 



The production of certified sustainable palm oil might be a feasible strategy to increase the income of oil palm farmers and CPO producers as this would open new export markets especially in Europe, were it is mandatory to use certified sustainable raw materials for biodiesel production.







}

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\noindent \textbf{Keywords:} Biodiesel, certification, cointegration analysis, CPO, international trade, market integration, palm oil, price transmission, sustainability, Thailand, Vector-Error Correction Model
\index[key]{Biodiesel}
\index[key]{Certification}
\index[key]{Cointegration analysis}
\index[key]{CPO}
\index[key]{International trade}
\index[key]{Market!integration}
\index[key]{Palm oil}
\index[key]{Price transmission}
\index[key]{Sustainability}
\index[key]{Thailand}
\index[key]{Vector-Error Correction Model}
\end{document}