Haze hits Malaysian palm oil output, quality

Haze hits Malaysian palm oil output, quality

KUALA LUMPUR (Reuters): Malaysia's palm oil output and
quality have been hit by smog from forest fires in Indonesia
which has blanketed large parts of Southeast Asia in the last few
months, plantation companies said yesterday.

According to a Reuters poll of five leading plantation
companies in Malaysia, the country's palm oil output in October
is believed to have fallen by between five and 12 percent from
September's 932,026 tons.

Officials at the plantation firms said the smog had blocked
sunlight from reaching leaves, slowing fruits' ripening process.

The projected lower output in October was also attributed to
seasonal production downtrend.

An official at a large plantation firm said: "We estimated our
production in October to have fallen by up to 12 percent. Quality
of oil is not very good and has resulted in a lower OER (oil
extraction rate). This is because of the haze."

Yields would drop further in the coming months because the
full impact of the smog had not yet been felt, officials and
analysts said.

"It is very difficult to predict the extent of the damage to
palm oil trees in Malaysia and Indonesia caused by the haze but
there will be an impact," said Greg Feldberg, a plantation
analyst at ABN-AMRO Hoare Govett Malaysia.

"The El Nino-induced droughts are going to lead to lower
yields for the next two years as well," he said.

A recent report by Worldsec Research said palm oil yield
growth in Malaysia was expected to drop to 1.1 percent in 1998
from 3.0 percent this year.

Growth in yield for Indonesia was also expected to slow down
next year to 1.1 percent from 6.0 percent in 1997, it said.

"Remember that these two countries account for 80 percent of
(world) palm oil supply, and any reduction in yield will have a
big impact on international supply conditions and therefore the
price of palm oil," Feldberg said.

Malaysian private crop forecaster Ivan Wong has forecast
Malaysia's October palm oil output at 912,000 tonnes, down two
percent from September.

He estimated palm oil stocks at the end of October at 995,000
tons against 877,704 tons at end-September, and exports in
October at 650,000 tons against 721,291 tons in September.