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.