Flood aftermath may see Malaysian palm output drop again in Jan

[KUALA LUMPUR] Palm oil output in Malaysia may fall further this month as the aftermath of monsoon flooding takes its toll on yields that are already low for seasonal reasons, while growers in Borneo were now braced for the monsoon, which has shifted to that region.

Malaysia's weather office forecast better conditions over the peninsular region in the coming week, dispelling fears of a fresh wave of flooding in the coastal states of Kelantan, Terengganu and Pahang, which were hardest hit by last month's rain.

"There is no monsoon surge expected over the next seven days. In general, the weather is getting better and more sunny in Peninsular Malaysia," said Ambun Dindang from the Malaysian Meteorological Department.

He added that isolated showers were expected over the west coast of the peninsular.

While sunny skies may help floodwater recede, crude palm oil production will still be depressed in January as the worst flooding in decades will have hurt yields that are already weak at this time of the year.

Severe flooding and strong currents destroyed infrastructure, including bridges used by palm tankers, and damaged palm-processing equipment.

"Recovery is a problem. This month's production will still be low for those flood-affected areas," said Roy Lim Kiam Chye, group plantations director at Malaysia's Kuala Lumpur Kepong.

"When you get weather interference in a low-crop season, it will affect production even more. It's a double whammy."

Output in Malaysia tumbled 22 percent in December, eating into palm inventories, which dropped to a five-month low of 2.01 million tonnes, according to the Malaysian Palm Oil Board.

The flooding helped lift benchmark palm oil prices, which raced up to six-month highs of RM2,383 (US$663) last Friday. The price was around RM2,342 on Wednesday.

Meanwhile, planters said thunderstorms and heavy rain had triggered flash floods on some estates in Sabah, Malaysia's top palm-producing state, which accounts for a third of its output.

"There are heavy rains and floods in Sandakan. Some areas cannot be harvested - there are plantations under water," said an official with a plantation firm with estates in the state.

If it carries on raining, planters will be forced to delay the harvesting and transportation of palm fruit, driving up the free fatty acid (FFA) content. Water-soaked fruit will also reduce oil extraction rates.

"Because of this rain, it won't be a surprise if Sabah production is 20 to 30 percent down in January," the official added.

REUTERS