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Production
Estimates and Crop Assessment Division |
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Production
Estimates and Crop Assessment Division |
November 19, 2003
Using the Malaysia rainfall data, yield for 2003/04
(Oct.-Sept.) is estimated by the Malaysian Rainfall Regression
Model (MRRM) at 3.68 tons per hectare, which is slightly above average.
This projection would give a production level of 12.3 million tons (using
a projected harvested area of 3.35 million hectares), less than the 13.4 million
tons currently forecast by USDA as of November
12, 2003. The
USDA is giving credit to increased fertilizer applications and the use of
improved selections of oil palm for higher yields that have been seen recently,
above what is expected from simply relying on rainfall data and a long term
yield trend.
Rainfall levels in July-September 2003 were favorable for
Malaysia palm oil production, unlike the previous
quarter. National average rainfall,
weighted for production by state, was 220 mm in the third quarter, 20 mm above
normal. This was up from 148 mm in the second quarter, 52 mm below normal.
During the last nine quarters, rainfall has been below average five times
and above average four times. However, during the last three quarters,
rainfall has been above average twice. As
a result, for the 2003/04 crop (which will be harvested from October 2003
to September 2004) low rainfall that occurred earlier (during the sex selection
and the floral abortion period) is expected to negatively affect production,
while higher rainfall that occurred more recently (during pollination) is
expected to positively affect production. The low rainfall that occurred in the
second quarter of 2003 (Apr.-Jun.) may have hurt pollination and may reduce
yield in the first quarter of 2004 (Jan.-Mar.).
A review of prices shows FOB Malaysia crude palm oil reached 1654 ringgit (RM) for January 2003, fell fairly sharply to RM1460 in April, and then fell again in August to RM1393. Since April, prices have recovered strongly to reach RM1649 in the first three weeks of October. The primary reason for the drop in prices in February appears related to India's establishing higher import duties on palm oil, while maintaining lower rates for soybean oil because of WTO commitments. Note that the August price of RM1393 per ton is still a very good price, compared to RM600 per ton a couple of years ago. Prices probably would have recovered sooner, but exceptionally high yields occurred from April through September and a large price premium developed for soybean oil relative to palm oil. The relatively high palm oil prices during the last year are likely to be an incentive to the plantation industry to expand production. It takes three years from planting for oil palm trees to begin producing fruit, and ten years until they reach maximum productivity. (The Malaysian Ringgit is fixed at 3.80 per US$.)
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.
