Asian palm-oil yields may suffer later in 2014 and in the next two seasons after unusual dryness in some Malaysian, Thai and Indonesian growing areas in the last two months.

Malaysia’s Johor state, accounting for 16 percent of national production, had less than half of normal rainfall in January. The country is the world’s second-biggest producer of the oil after Indonesia and Thailand ranks third, while India is the leading global importer.

Palm-oil futures rose 5.3 percent so far this year on Bursa Malaya Derivatives in Kuala Lumpur, following a 9.1 percent gain in 2013. El Nino weather conditions, which can bring drought to Southeast Asia, may occur in coming months, Australia’s Bureau of Meteorology said Feb. 25.

It is too early to say whether there will be an El Nino event this year. If it remains dry in several palm-oil producing regions, the biggest impact will materialize in the next two seasons and not in Oct.-Sept. 2013-14.

The Malaysian peninsula, most of Thailand and Indonesia’s central Sumatra received less than 20 percent of normal rain in the past 30 days, according to data from World Ag Weather.

Fruit Bunches

Another two to three weeks of dryness in Malaysia will increase stress on oil palms, potentially reducing the weight of fruit bunches. That would start to show up in reduced production near 2014’s end, according to the researcher.

Parts of Thailand were very dry in the November-February period, affecting oil palms and causing young fruit bunches to drop. That will reduce future yields and production.

Some areas of Indonesia were also affected by dryness in recent weeks, and further developments “will have to be watched closely.”

India’s 2013-14 rapeseed harvest is forecast to rise 11 percent to a record 7.59 million metric tons from 6.85 million tons. The crop benefited from favorable January and February rainfall and suffered little damage from cold weather and disease.

If this is confirmed, domestic vegetable-oil supplies will improve significantly in coming months, probably tempering import requirements.

Source - http://www.businessweek.com/