Wed, Jan 07, 2015 - Page 6 News List

Monsoons put Malaysian palm oil output in danger

Bloomberg

A worker loads harvested oil palm fruit into a wheelbarrow at the Bell Eco Power palm oil plantation in Batu Pahat, Malaysia, on March 3 last year.

Photo: Bloomberg

A monsoon surge that brought the worst floods in decades to Malaysia, hurting palm oil output in the world’s second-largest grower, is forecast to move south this week, risking further inundations in Johor and Sarawak.

Heavy rains are set to start today or tomorrow in the two states and could last two or three days, potentially causing floods, according to Malaysian Meteorological Department officer Ambun Dindang. Johor, at the southern end of Peninsular Malaysia, and Sarawak in Borneo Island account for about one-third of the nation’s total production.

Palm oil rallied last week to the highest level in almost two months after the severe flooding in some states in the north hurt harvesting, and Ambun’s forecast raises the possibility of a second wave of disruptions further south. The wetter-than-usual weather that stretched from southern Thailand, through Malaysia and into Indonesia also triggered rubber supply concerns, sending futures into a bull market.

“At the moment, the cloudy areas are more towards the sea, just at the northeast of Johor and northwest of Sarawak,” Ambun said in a telephone interview yesterday from Petaling Jaya, near Kuala Lumpur. “These patches of clouds are still hovering over this place. So once it moves in, you can see some increase in rainfall amount, especially in Johor and Sarawak.”

Palm oil for March delivery yesterday dropped 0.1 percent to 2,280 ringgit (US$641) per tonne at the midday break on Bursa Malaysia Derivatives. Last month, most-active futures advanced 4.3 percent as the floods spread in Kelantan, Terengganu and Pahang, three states that lie north of Johor along the east coast of Peninsular Malaysia. The price rallied to 2,308 ringgit on Dec. 29, the highest since Nov. 4 last year.

“At the beginning of the monsoon season in November and December, normally the northeastern part of Peninsular Malaysia will get this impact of the monsoon surge, and then it propagates to the south,” said Ambun. “Floods are possible,” he said, referring to areas in Johor and Sarawak.

Malaysian output might have dropped 22 percent to 1.36 million tonnes last month, CIMB Investment Bank Bhd analyst Ivy Ng wrote in a report on Monday, citing a survey by the bank’s futures team. Inventories probably declined to 2 million tonnes, providing short-term support to prices, Ng said.

Malaysian Prime Minister Najib Razak is suffering from E. coli after visiting the flood-hit areas, his media office said in a Twitter posting. Flood victims are concerned about diseases caused by contaminated water, garbage and carcasses, the Star newspaper reported on its Web site yesterday.

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