UPDATE: Malaysian Palm Oil Output To Fall In 2010 – Mistry

Malaysia’s palm oil production is likely to fall next year from this year’s level of 17.5 million metric tons due to a replanting program, London-based vegetable oil analyst Dorab Mistry said Tuesday.

Malaysia has encouraged the replanting of trees, which take three years to start producing, Mistry said.

Around 100,000 hectares of plantations will be replanted, translating into a loss of 400,000 tons of palm oil, he said, though he added that Indonesia's palm oil output in 2010 is likely to rise by 1 million to 1.5 million tons.

Production from existing trees in Malaysia is in a high cycle that started in September and will last for about eight-nine months, after which the trees will need a rest and will be in a low production cycle, he said.

However, dry weather due to El Nino climate conditions is also likely to affect the 2010 crop, he said.

"If that (expected decline) were to happen, this will be the first time in history that Malaysian CPO production will have declined for two years in a row," Mistry said.

In 2008, Malaysia produced 17.7 million tons of palm oil.

Prospects for other oilseed crops are better, with expectations of record soybean harvests in Argentina and Brazil, he said.

Global supply of vegetable oils is expected to rise by 3.25 million tons in 2010, lower than Mistry's earlier estimate of 4.45 million tons.

Global vegetable oil demand is forecast to rise by 5.5 million tons, he said.

Mistry expects crude palm oil futures to rise to MYR2,800-MYR3,000 per ton by end of March 2010, while the price of refined, bleached and deodorized palm olein is likely to climb to $900/ton by January.

Malaysian crude palm oil futures were quoted at MYR2,524/ton Tuesday. RBD palm olein was quoting at $760/ton, free on board Malaysia, according to the Solvent Extractors' Association of India.

India, one of the largest vegetable oil consumers in the world, may import more oils in the marketing year that started Nov. 1 due to lower oilseed production and a slowdown in crushing, Mistry said.

"India's imports may exceed last year's as farmers are reluctant sellers of oilseeds. Besides, Indian oilseed production will actually be smaller than that estimated by some people," he said.

In 2008-09, India imported a record 8.66 million tons of vegetable oils. Per capita consumption of vegetable oils will rise 4%-5% this marketing year, Mistry said.

Source : Dow Jones