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Thai govt to buy 50,000 T palm oil after drought cuts domestic supply

BANGKOK, Jan 19 (Reuters) - Thailand plans to import around 50,000 tonnes of crude palm oil from February due to a domestic shortage caused by drought, using a 1.5 billion baht ($46 million) government fund, a deputy prime minister said on Monday.

Thailand is the world's third-largest palm oil producer, although its output is a fraction of that of top producers Indonesia and Malaysia. Thailand last imported palm oil in 2013.

"This will be a short-term measure until we reach palm oil production season," Prawit Wongsuwan told reporters following a meeting in Bangkok. Palm oil output peaks in the second half of the year.

Imports are expected to come from either Indonesia or Malaysia, Wiwan Boonyaprateeprat, secretary-general of the Thai Oil Palm and Palm Oil Association, told Reuters.

The government would pay a maximum of $0.86 per kg, including delivery costs, he said.

Thailand is experiencing drought in nine provinces, which cut palm oil output in November and December 2014 by 27 percent on the year, according to the Office of Agricultural Economics.

"Output of palm nuts in November and December declined drastically due to drought," said Wiwan.

Thailand has around 110,000 tonnes of palm oil in storage and would like to boost storage levels to around 135,000 tonnes, Commerce Minister Chatchai Sarikalya said last week.

The country consumes around 150,000 tonnes per month for cooking and fuel, the commerce ministry said.

A group of palm oil farmers in the south have voiced concern over the plan, fearing it will reduce domestic prices for oil.

"It will have an impact no matter what, because the government is buying a large amount," a Thai palm oil trader said.

Farmers plan to submit a letter to Prime Minister Prayuth Chan-ocha to protest at the government's plan, media reported a group of farmers in Thailand's south as saying.

The purchases were likely to have little impact on the international palm market, traders said.

"It's a small amount and Thailand is not a big buyer," said one Malaysian-based trader with an international commodities brokerage.

($1 = 32.5400 baht) (Reporting by Kaweewit Kaewjinda and Aukkarapon Niyomyat in Bangkok; Additional reporting by Anuradha Raghu in Kuala Lumpur; Editing by Amy Sawitta Lefevre, Simon Webb and Alan Raybould)