KUALA LUMPUR, Jan 11 - Our final estimate on CPO production in Decembershows on upward revision of 30,000 tonnes to 940,000 tonnes. More dataavailable warranted upward revision on the crop in the East Coast regionof Peninsular Malaysia and Sabah, both major producing areas that receivedheavy rainfall in the last 7-10 days of December.Basically there were more crop on the palms than expected. And despitethe wet weather and floods, the overall oil extraction rate (OER) at anestimated 19.4 percent only dropped slightly or not as much as expectedand was also slightly higher than the rate in December 2000 when therewere no reports of floods. CPO output declined an estimated 11.7 percentcompared to November. Production fell around 14 percent in PeninsularMalaysia and eight percent in East Malaysia, For the whole of 2001production in the country expanded 8.8 percent to 11.8 million tonnes.The estimate on palm oil offtake in December remains unchanged at 1.11million tonnes. Concomitant with the revision in output, the estimate onend-December stocks of palm oil is raised to 1.14 million tonnes. Thisrepresents a decline of 155,000 tonnes from November. Compared to a yearearlier, stockswere down around 280,000 tonnes. In contrast to the substantial drawdownin palm oil stocks, stocks of PKO remained at a burdensome level. Decemberrepresents the third consecutive month in which PKO stocks remainedstagnant at or near record high level of around 360,000 tonnes. Totalstocks of PK/PKO, oil basis, are estimated at just above 400,000 tonnes orsome 5,000 tonnes lower than November. Compared to December 2000, stockswere up by around 80,000 tonnes. Production of PK in December declined27,000 tonnes or nine percent to an estimated 289,000 tonnes. Given thecontrasting stocks situation between palm oil - basically CPO - and PKO,it is no surprise that while the average price of CPO in PeninsularMalaysia rose 54.50 ringgit to 1,113 ringgit in December, the price of PKand PKO were hardly changed at 494.50 ringgit and 1,027.50 ringgitrespectively.Consequently, the discount of PKO to CPO widened to 85.5 ringgit inDecember from 30.5 ringgit in November and 10 ringgit in October. Inrecent days the spread has widened to 100 ringgit - 112.50 ringgit. CPOprice averaged 900 ringgit last year, down 97 ringgit or neatly 10 percentfrom 2000. PK price fared much worse, dropping 280 ringgit or 37 percent.After posting gains of 43-50 ringgit in the first-three days of thenew year, CPO futures advanced further early this week. Follow-throughupward momentum along with other chart-driven forces propelled price 57-51ringgit higher in active trade in the first-two days of this week. Settingthe pace in the global vegoils market and at times displaying independentstrength, the sustained runup was also bolstered by price of other majoroils which tried to catch up. On Tuesday the March futures contract rose33 ringgit to an intraday high of 1,287 ringgit before profit-taking alongwith commercial selling trimmed the gains to just 13 ringgit and below the1,250 ringgit mark at the close. Lagging cash values coupled with lack ofvisible fresh Chinese buying plus market talk the release of import quotasmight be delayed to February also had a restraining impact on speculativebuying interest.The market retreated and slipped into the red in the last two dayswhen it became evident bulk shipments from Malaysia would drop to wellbelow 300,000 tonnes in January 1-10. Yesterday March futures slipped 13ringgit to 1,218 ringgit and brought losses over two days to 29 ringgit.Our current projection of a 100,000 tonnes drop in palm oil exports thismonth is premised chiefly on a large decline in shipments to China. Evenif China were to release the quotas in the next week or so, it is unlikelyto result in a rush in shipments in late January/early February.The soya market in the United States (U.S.) and South America must beclosely monitored in the weeks and months ahead. This applies particularlyfor export sales of SBO for the April-June quarter. Argentina has repeggedthe peso to 1.40 to the dollar but the develuation of nearly 30 percent isunlikely to be sustained. Argentina farmers/exporters who hold back beyondthis month in selling for fear further develuation and/or inflation risklosing overseas markets. With the Argentina government in desperate needfor revenue, export duties/taxes may also be imposed or raised in the nearfuture.(The opinions expressed in this article represent the views of theauthor only. They should not be seen as necessarily reflecting the viewsof Reuters)