Kuala Lumpur, March 6 - Indonesia and Malaysia, the world's top palm producers, will see only a small rise in output this year due to tree stress after months of good harvests and less fertiliser usage, a top industry analyst said late on Thursday.
Indonesian output of the tropical oil was expected to rise 7.9 percent to 20.6 million tonnes while Malaysian production was seen rising slightly to 17.9-18 million tonnes, said Thomas Mielke, head of German oilseeds research group Oil World.
The Malaysian forecast is higher than the 17.6 million tonnes prediction Mielke made in November, and up from the 17.7 million tonnes produced in 2008.
"(Malaysian output is) up only slightly due to expectations of a decline in yields after the very high production in the second half of 2007, the first 9-10 months of 2008," Mielke told Reuters from the German city of Hamburg ahead of the Bursa Malaysia Palm Oil Conference next week.
"The trees are undergoing stress and the yields are declining, which will go on well into 2009. Slowing production is also supported in a few cases by less fertiliser application."
A Reuters poll this week showed Malaysia's February palm oil stocks probably tumbled 8.6 percent to 1.67 million tonnes, their lowest in 16 months, as output slowed further on floods in key growing regions. [PALM/POLL]
Mielke said Indonesia, the top producer, will see mature planted area rise approximately 450,000 hectares for 2009 but cautioned that there would be a slight reduction in average yield.
Indonesia has planted 7.1 million hectares of oil palm estates, an area about the size of Ireland, with mature planted area accounting for 70-80 percent in 2008, according to analyst calculations.
Malaysia only has 4.3 million hectares of oil palm estates with 80 percent mature, trader estimates and government data showed. Both Southeast Asian countries are carrying out a replanting exercise to cut down oil palm trees which are 25 years old and above.
LOWER STOCKS, BETTER DEMAND?
Weaker palm oil production was bound to lead to lower stocks through 2009 due to still resilient global vegetable oil consumption, Mielke said.
"In this economic crisis, oil meal consumption has fallen compared with oils and fats," he said, adding that global oil seed crushers were looking to get a larger earnings share from edible oil sales rather than oil meal due to higher palm prices.
Prices of palm oil have gained 12 percent so far this year but are still 57 percent down from a record high of 4,486 ringgit ($1,204) hit last March.
Palm prices have been recovering thanks to strong shipments out of Malaysia as global vegetable oil traders turned away from soybeans due to the drought in key South American producing countries.
Now a tense standoff between farmers and the government in Argentina over exports and prices has caused concerns over soybean supplies from South America.
"We have showed that in October to March 2008/2009, consumption of oil meal declined 3.5 million tonnes. In contrast vegetable oil increased 2.8 million," Mielke said.
"The reduction in oil meal shows that soybean crushing was declining sharply. This lowers the exports and production of soybeans and that's why the world has to depend on palm oil." Mielke said this year palm oil could take up a greater market share in countries like India, China and North African countries because of less soybean oil for export.
"Even in Europe there will be a propensity to take up more palm oil as a food source," Mielke said.
Although the European Union has under environmental pressure backed down from a 10 percent target for biofuels to be used for road transport, Mielke said German power producers were buying more palm oil to burn for electricity generation.
"Germany will buy 400,000-500,000 tonnes in the 2008/2009 season to burn palm oil for electricity generation," he said.
"No exact numbers, but it will be a much higher demand because palm oil prices have fallen. Last season, there was not much because prices were so high."