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Heavy rain causes palm oil output to drop [11-01-2011]  
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Malaysia's palm oil production fell to the lowest in 10 months largely due to heavy rain.

Production of the country's palm oil slid by 15.5% to 1.23 million tonnes in December 2010 on a month-on-month (m-o-m) basis.

In comparison, production last February was 1.16 million tonnes.

According to monthly statistical data from the Malaysian Palm Oil Board, palm oil production from Peninsular Malaysia recorded an apparent decrease from its counterparts in Sabah and Sarawak on a m-o-m basis.

Peninsular Malaysia's palm oil production in December declined 19.6% to 647,185 tonnes m-o-m while that from Sabah and Sarawak only fell 10.4% to 585,422 tonnes m-o-m. The decrease in the December production was also reflected in the country's palm oil stock to 1.61 million tonnes, down 1.3% from the previous month.

Exports of palm oil also fell by 14.6% to 1.3 million tonnes in December compared with the previous month.

According to an industry analyst, heavy rain was only one of the factors that affected the production.

“We are still trying to figure out the other factors that could have affected production especially from Peninsular Malaysia,” he said yesterday, adding that he was monitoring the market reaction to see the impact of these numbers, if any, on crude palm oil (CPO) prices.

“If these lower production and stockpile numbers fail to push up the prices, then the recent CPO price rally may have tired' out,” he said.

This may also aggravate the situation involving the shortage of cooking oil that many said could be due to manipulation of suppliers.

A Bloomberg report citing DBS Vickers Securities (Singapore) Pte analyst Ben Santoso said production was expected to be worse in the first two months of the year, due to the weather.

“Inventory is expected to go down further and prices to stay strong until early March,” he said.

CPO price for delivery in March shed RM33 to RM3,730 per tonne yesterday.

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