WASHINGTON, Aug 29 (Reuters) - The U.S. Agriculture Department's ForeignAgricultural Service released the following report on Malaysia's cropconditions.Malaysia: Lower Rainfall and Lower Than Expected Area Reduce Palm OilProspectsMalaysian monthly average rainfall was 161 millimeters, 39 millimetersbelow normal in the second quarter of 2002, and so has now been belownormal for 4 out of the last 5 quarters. The less than normal rainfall islikely to negatively impact palm oil yields for the 2002/03 marketingyear.Yield Projected Lower for 2002/03Using the Malaysia rainfall data, yield for 2002/03 (Oct.Sept.) isforecast by the Malaysia Rainfall Regression Model (MRRM) at 3.69 tons perhectare. This is slightly below the 5-year average of 3.76 tons perhectare, and well below the 4.06 tons per hectare seen in 2000/01. TheMRRM model is projecting a yield of 4.01 tons per hectare for 2001/02.This projection is likely too high because the excessively high rainfallof 363 mm in the fourth quarter of 2001 may have reduced pollinationlevels and will reduce yield in the third quarter of 2002 below what themodel is projecting.Mature Palm Oil Area Less Than ExpectedThe Malaysian Palm Oil Board came out with an estimate of mature palm oilarea in 2001 of 3.01 million hectares, 310,000 hectares lower than hadbeen expected. As a result, mature area in 2001 increased just 63,000hectares from 2000, less than the 128,000 hectares average increase overthe previous 5 years. A large part of the reason why area increasedslowly was the replanting program that was implemented by the Malaysiangovernment. The program, which began in July 2001 and finished at the endof June 2002, was instituted to encourage producers to replace stands oftrees that were more than 25 years old. According to the MalaysianMinister of Primary Industries, 198,000 hectares of trees were cut underthe replanting program, which offered farmers MR1000 (US$263) for eachhectare of land that was cut.Production Outlook WeakUsing estimated area of 3.07 million hectares and the MRRM yieldprojection of 3.69 tons per hectare implies output of 11.3 million tons ofcrude palm oil for the 2002/03 marketing year. The MRRM projection issomewhat lower than the official USDA forecast for 2002/03, which is at11.8 million tons. The MRRM implied output for 2001/02, using areaestimated at 3.01 million hectares, is 12.0 million tons, higher than theofficial USDA estimate of 11.7 million tons.