August 10, 2001

Malaysia: Rainfall Continues While Oil Palm Area Expansion Slows

Rainfall in Malaysia continues to fall at higher-than-normal rates.  For the most part this will promote high palm oil yield. Monthly average rainfall, weighted by region for palm oil area, has been above normal for 9 of the last 10 quarters, with the 3^rd quarter of 2000 (July-September) missing normal by just 4 millimeters. Excessive monthly average rainfall of over 300 millimeters from November 2000 to January 2001 may have decreased pollination and may have resulted in reduced yields six months later (May-July). Yields are expected to pick up in August or September, benefiting from the good rainfall levels of the past 10 quarters.

Low crude palm oil prices and a government program that has subsidized the replanting of approximately 200,000 hectares of old palm stands have slowed the growth of palm area after years of rapid expansion. Mature oil palm area in 2000, estimated by the Malaysia Palm Oil Board, is 2.94 million hectares, just 85,000 hectares greater than in 1999. Mature area increased by 260,000 hectares in 1999, and has increased by an average of 120,000 hectares over the last 10 years. A flattening of the amount of palm area is occurring in Peninsular Malaysia, while expansion is continuing in Eastern Malaysia. From 1999 to 2000, Peninsular Malaysia saw mature area decrease by 24,000 hectares and total mature and immature area decrease by 6,000 hectares. Meanwhile, Eastern Malaysia saw mature area expand by 109,000 hectares and total area go up 69,000 hectares.

A linear regression model using this precipitation data projects Malaysia palm oil yields of 4.22 tons per hectare for 2000/01 (October - September) and 3.88 tons per hectare for 2001/02.

Actual production data is now available for the first three quarters of 2000/01, so only the fourth quarter of the 2000/01 estimate is projected. Harvested area for oil palm, estimated at 2.94 million hectares for 2000/01 and 3.31 million hectares for 2001/02, implies production levels from the regression model are 12.5 million tons for 2000/01 and 13.1 million tons for 2001/2002. This compares with August USDA official production estimates of 12.1 million tons for 2000/01 and 12.6 million for 2001/02.

Note: The linear regression model uses rainfall lagged 3 quarters, one-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 understates yield when rainfall is optimal. More information than the results of this model are used in determining official USDA estimates for Malaysian palm oil.

For more information, contact Paul Provance with the Production Estimates and Crop Assessment Division on (202) 690-0143.