March 1, 2005Malaysia:  Palm Oil Yields High, Rainfall VariableRainfall in Malaysian palm oil regions was above normal during the fourthquarter of 2004 (Oct.-Dec.).  It averaged 335 millimeters per monthcompared to normal rainfall of 291 millimeters.  For the past 10 quarters,5 quarters have had above normal rainfall and 5 quarters below normal;consequently, the outlook for the remainder of the 2004/05 (Oct.-Sept.)crop is for near normal yields.  Yield should be slightly below normal inthe first quarter of 2005 (Jan.-Mar.) but above normal in the second andthird quarters.   Palm oil yields in Malaysia were higher than anticipated in the fourthquarter of 2004, coming in relatively high at 1.14 tons per hectare.  Thisis higher than the 1.05 tons per hectare that yields averaged for thefourth quarter during the previous five years.  The higher than expectedyield for the fourth quarter of 2004 pushes the projected yield for thetotal 2004/05 marketing year (Oct.-Sept.) to 4.00 tons per hectareaccording to the Malaysian Rainfall Regression Model (MRRM).  Three monthsago, the MRRM model was projecting 2004/05 yield at 3.79 tons per hectare.

 The new projection of 4.00 tons per hectare would give a production levelof 13.9 million tons for 2004/05 (using a harvested area of 3.46 millionhectares).  The MRRM projected level is less than the 14.5 million tonscurrently forecast by USDA. Early indications for the 2005/06 crop are for higher than trend yield. Rainfall was above normal during the floral sex selection and floralabortion periods for the fruit bunches that will be harvested in the firsthalf of the marketing year, but not enough data is yet available for theMRRM model to make a projection for the entire marketing year.Note: The MRRM linear regression model uses rainfall lagged 3 quarters,1-year cumulative rainfall lagged 6 quarters, and time as independentvariables regressed against yield.  Because of the characteristics oflinear regression, the model continues to increase projected yields evenas rainfall becomes excessive; thus, the model tends to overstate yieldwhen average monthly rainfall lagged 3 quarters is above 300 mm, andunderstate yield when rainfall is optimal.  A variety of informationsources are used in determining official USDA estimates for Malaysian palmoil.Oil palm production potential is reduced when trees are exposed tostressful conditions.  Low moisture is the most common stressful conditionoil palm faces, so monitoring rainfall is useful in predicting palm oilyield levels.  The most critical periods for oil palm are 24 months, 18months, and 6 months prior to maturation of the fruit bunches. Twenty-four months before fruit maturity is when sex selection of theflowers occurs.  If oil palm trees are subjected to stress at thiscritical time, a higher proportion of the flowers become male flowers,which do not become fruit.  Eighteen months before fruit maturity is thetime of floral abortion.  If oil palm trees are subjected to stress atthis critical time, fewer flowers develop so a smaller number of fruit isproduced.  Six months before fruit maturity is the time of pollination. If oil palm is subjected to stress at this critical time, less pollinationoccurs and a smaller number of fruit is produced.