Malaysia
: Near
Normal
Rainfall Supports Palm Oil Output
Malaysia’s national average rainfall in the third quarter of 2005 was slightly above
normal. From July to September it
was 214 millimeters per month compared to a normal of 200 millimeters. This
level of rainfall is favorable for production that will occur in the second
quarter of 2006. During the last 10
quarters, 6 quarters had below normal rainfall and 4 quarters above normal
rainfall. Overall, this is expected
to be moderately detrimental to palm oil yields for the next six quarters.
The delayed effect of rainfall will be slightly
positive from October 2005 to June 2006, and slightly negative from July 2006 to
March 2007.
The Malaysian rainfall regression model (MRRM) forecasts
yield for marketing year 2005/06 (Oct. 2005 – Sept. 2006) at 3.87 tons per
hectare. This is below the 20 year
trend of 4.07 tons but above the 20-yr average of 3.70 tons.
The MRRM forecast is probably below a reasonable estimate because the
model does not adequately take into account that yields in recent years have
been increasing rapidly. A
reasonable way to interpret the MRRM model would be that it suggests that
slightly above trend yield should be expected.
The 10-year trend yield is 4.33 tons per hectare.
If one takes the MRRM forecast yield level and multiplies
it by an estimated harvested area of 3.60 million hectares, output is forecast
at 13.9 million tons for 2005/06. This
is below the official November USDA estimate of 15.5 million metric tons which
corresponds to a yield of 4.30 tons per hectare using the same 3.60 million
hectare area estimate.
Stable prices over the last year continue to support
production in Malaysia. The monthly
average crude palm oil (CPO) price dropped from RM 1,460 (US$1.00=RM3.80) in
October 2004 to RM 1,299 for February 2005 when palm oil yields greatly exceeded expectations, but the price recovered quickly and CPO has traded close
to RM 1,400 from March to October. (See
Attache Report MY5045, “Oilseeds and Products Update.”)
Biofuel is generating a great deal of enthusiasm in the
palm oil industry. With talk of high
petroleum prices, environmental pollution and depleting fossil fuel reserves,
Malaysian palm oil producers see huge opportunities to transform palm oil to
biofuel and do not want to miss out on the predicted huge export markets.
The Malaysian Palm Oil Board (MPOB) has announced plans to build the
country’s first biofuel plant in partnership with a private plantation
company. Scheduled to come on line
in October 2006, it would have an annual production capacity to process 60,000
tons of refined palm olein into biofuel. The
MPOB expects at least five more plants to be established during the next two
years. At the recent international
palm oil conference, the Malaysian Minister of Plantation Industries and
Commodities announced that 3 biofuel plants are to be built.
Europe is the targeted market due to its regulation with the objective
that usage of renewable fuels reach 5.75 percent of total energy use by 2010.
The production cost of palm oil is said to be about 40 percent lower than
for other biofuel feedstocks. The
Malaysian government is drafting a national biofuel policy and hopes to submit
it to Parliament in 2006.
Note: The MRRM linear regression model uses rainfall
lagged 3 quarters, 1-year cumulative rainfall lagged 6 quarters, and time as
independent variables regressed against yield.
Because of the characteristics of linear regression, the model continues
to increase projected yields even as rainfall becomes excessive; thus, the model
tends to overstate yield when average monthly rainfall lagged 3 quarters is
above 300 mm, and understate yield when rainfall is optimal.
A variety of information sources are used in determining official USDA
estimates for Malaysian palm oil.
Oil palm production potential is reduced when trees are
exposed to stressful conditions. Low
moisture is the most common stressful condition oil palm faces, so monitoring
rainfall is useful in predicting palm oil yield levels.
The most critical periods for oil palm are 24 months, 18 months, and 6
months prior to maturation of the fruit bunches.
Twenty-four months before fruit maturity is when sex selection of the
flowers occurs. If oil palm trees
are subjected to stress at this critical time, a higher proportion of the
flowers become male flowers, which do not become fruit.
Eighteen months before fruit maturity is the time of floral abortion.
If oil palm trees are subjected to stress at this critical time, fewer
flowers develop so a smaller number of fruit is produced.
Six months before fruit maturity is the time of pollination.
If oil palm is subjected to stress at this critical time, less
pollination occurs, and a smaller number of fruit is produced.
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