3/27/2003 - Palm oil prices are expected to suffer a further set back thisseason, as its exports to the Middle East and European countries have beenhit by the Iraq war.

Additionally, India - the largest buyer - is unlikely to boost itspurchases despite lower domestic production due to drought conditions.

Malaysia's palm oil futures, according to reports from Kuala Lumpur, weremostly lower today.

""The downtrend is intact. Any rebound won't be sustained," said a dealer.The benchmark third-month futures, the June contract, fell 10 ringgit to1,381 ringgit ($363.42) a tonne after trading as high as 1,395 ringgit dueto overnight gains in Chicago soya futures.

Rumours circulated in the market that main plantation companies andrefiners have been liquidating their positions because of theuncertainties caused by the Iraq war.

Traders expect the war in Iraq to disturb shipments to main consumers inEurope and the Middle East, which account for 40% of Malaysia's total palmoil exports annually.

Malaysia is the world's largest palm oil producer. Crude palm oil (CPO)production reached 11.9m tonnes in '02, almost unchanged from 11.8m tonnesin the previous year.

Against a backdrop of a marginal increase in CPO production and a smallincrease in export volume, stocks of palm oil closed slightly lower at1.1m tonnes '02 end (against 1.2m tonnes in end-'01).

Tight global edible oil supplies pushed up palm oil prices to an averageof 1,364 ringgit ($358.95) a tonne compared with 895 ringgit in '01,representing a 52.4% increase. Malaysia exported 10.9m tonnes of palm oillast year, up from 10.5m tonnes in '01.

During the current year, however, Indian imports as well as the prices areexpected to be lower than earlier estimates as Indian demand is more pricesensitive.