(The opinions expressed in this article represent the view of leadingpalm oil market analyst Ivan Wong. They should not be seen as necessarilyreflecting the views of Reuters)KUALA LUMPUR, Aug 21 - CPO production rose 6.9 percent or 65,100 tonnesto 1.01 million tonnes in July. A decline of 2.1 percent or 7,600 tonnesin East Malaysia was more than offset by an increase of 12.5 percent or72,700 tonnes in Peninsular Malaysia. On an annual basis, productionexpanded 12.4 percent.This was the second consecutive month of growth and brought growth inJune-July to seven percent. What is encouraging is that production inPeninsular Malaysia has turned positive in July after 10 months ofnegative growth. Production growth in East Malaysia meanwhile acceleratedto 31.7 percent in July from six percent in the first-six months. For thefirst-seven months this year, production in the country shrank 3.4 percentor 223,800 tonnes to 6.34 million tonnes. The deficit will shrink in thenext three months.Tentatively we estimate production in August to show a month-on-monthincrease of not less than five percent and a year-on-year increase ofeight percent. After two consecutive month-on-month declines in Sabah, thestate is expected to see a seasonal increase of not less than 10 percentthis month. The pickup started in late first month and continued strong infirst-half August.However, there are uncertainties on the sustainability of the pace inlater-half August and September due to a shortage of workers. The HomeMinistry Secretary General disclosed last Sunday that 318,000 illegalimmigrants left the country up to July 31 and 52,000 left in first-halfAugust. A majority of those who left this month were plantation workers inSabah. The August exodus might rise to 70,000.Employers may have to wait a month, if not longer, to recruit newworkers or to re-employ workers who return with proper documents. Palm oilofftake at one million tonnes in July or 11,000 tonnes higher than Junewas 15,000 tonnes above our estimate. This was offset by higher thanexpected imports.Consequently, end July stocks of palm oil at 942,000 tonnes were wellwithin our estimate and 29,000 tonnes higher than a month earlier. Palmoil exports rose a modest 4,300 tonnes to 883,300 tonnes in July and areexpected to show a biggerincrease of some 25,000 tonnes this month. Asthis is unlikely to match the rise in production, stocks of palm oil areestimated to increase 45,000 tonnes to 985,000 tonnes at end August.World market price of soybean and canola/rapeseed and major surged totheir highest levels in more than three years following the USDA releaseon August 12 of an unexpectedly large drop in estimated U.S. SB output andprojected tight supplies for U.S. SB and global oilseeds and vegoils in2002/2003. Hot and dry weather during July had resulted in a big drop inSB yield to 36.5 bushel (0.993 tonnes) per acre. Estimated SB output at2.628 billion bushel (71.53 million tonnes) represents a downward revisionof eight percent from projection made a month earlier and a contraction ofnine percent or 263 million bullish (7.14 million tonnes) from last year'sproduction.Reflecting chiefly contractions in output of canola/rapeseed of 2.3million tonnes and cottonseed of 2.8 million tonnes, world oilseedproduction in 2002/2003 was projected to drop 3.4 million tonnes to 319.9million tonnes. This would mark the first contraction since 1995/1996. TheUSDA projected global output of vegoils to increase 1.14 million tonnes to92.26 million tonnes but because of lower opening stocks, world supply ofvegoils in 2002/2003 is likely to be little changed compared to 2001/2002.Assuming a conservative growth in offtake of 1.37 million tonnes,stocks of vegoils were projected to drop 600,000 tonnes to 6.6 milliontonnes in the year ending September 2003. Stocks at end September 2002were estimated to fall 1.20 million tonnes from a year earlier. Meanwhilein India the Solvent Extractor Association cut its projected decline inedible oil production from the kharif oilseed crop to 500,000 tonnes. Thiswould be attributed chiefly to lower output of groundnut oil, the price ofwhich surged 15 percent or $150 over the last seven days. October CPOfutures settled at 1,519 ringgit and RBD olein at $430 yesterday, up from1,456 ringgit and $412.50 respectively last Friday.