Malaysian palm oil output slumps the most since 2006

KUALA LUMPUR: After the deluge, the reckoning. Palm oil output in Malaysia fell by the most in eight years after floods hit plantations in the second-largest producer, according to official data that showed a bigger decline than expected. Output tumbled 22% to 1.36 million tonne last month from November, the biggest drop since December 2006, the Palm Oil Board said on Monday.

That compares with a 1.46 million-tonne estimate in a Bloomberg survey last week. Reserves fell 12% to 2.01 million tonne, smaller than the 2.05 milliontonne median in the survey. Exports rose 0.4% to 1.52 million tonne, while the survey showed a 2% drop.

Futures surged to a six-month high last week on concerns that the worst floods in decades in Peninsular Malaysia hurt harvesting, exacerbating the impact of a seasonal decline in output in the world’s most-used edible oil.

The heavier-than-usual monsoon rains displaced hundreds of thousands, while damaging roads and bridges. Production may also be weaker in January and February, according to Chandran Sinnasamy, executive director at LT International Futures.

"The tightness in nearby oil supplies will support the price," Chandran said by phone from Kuala Lumpur. “At the same time, poor exports for the current month will limit the gains."