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KUALA LUMPUR, Aug 7 (Reuters) - Slower palm oil output growth in Malaysiain the second half of 2001 and falling end-month stocks will help keepprices rising, industry sources said on Tuesday.Malaysia's crude palm futures have been climbing steadily since earlyJuly in anticipation of a slow down in local output in the coming months,replacement of ageing trees as well as rises in the Chicago market.On Tuesday, benchmark third-month October crude palm oil (CPO) futurescontract broke the 1,300 ringgit ($342.11) per tonne resistance level androse to a high of 1,308 ringgit, its highest level since October 11, 1999."Production has been very high in the past two to three years. So thisyear, production will be at a plateau," Emerson Liau Yong Hwa, chairman ofthe Incorporated Society of Planters, told Reuters by telephone.Liau said palm oil trees in the world's largest producer are entering acycle in which they will rejuvenate and produce less oil after a peak in2000.This year's second half output growth may slow to 15 percent, comparedto 35 percent in normal conditions.Slower growth is already evident in the eastern state of Sabah onBorneo, where July output is seen falling by 20 percent from June, saidLiau.Sabah, which accounts for around 37 percent of Malaysia's output, isthe country's largest palm oil growing area.

UPSWINGSome analysts said the upswing in CPO prices was helped by tighteredible oil supplies due to dry weather in soybean producing countries suchas the United States, Canada and China. Soyoil is palm oil's directcompetitor.Demand from India -- Malaysia's main palm oil buyer in 2000 -- whichhas been picking up ahead of Diwali, the Hindu festival of lights inNovember, was also a boost. India purchased 2.03 million tonnes of palmoil from Malaysia last year.Less output and more exports have steadily cut down Malaysia's stocks,which had swelled to a record 1.56 million tonnes last November. End-Julystocks were estimated at up to 915,000 tonnes, down from 1.03 milliontonnes in June.The official Malaysian Palm Oil Board (MPOB) said the local palm oilindustry was confident prices would hold between 1,200 to 1,300 ringgitper tonne this year."The industry is confident the price will sustain or even improvebecause many countries are cutting back on production," MPOB directorgeneral Yusof Basiron told the national Bernama news agency this week.Analysts said Malaysia's replanting scheme, in which planters will geta subsidy of 1,000 ringgit ($263.16) per hectare this year for cuttingdown trees and replacing them with new ones, had helped bolster prices.Liau said falling prices in the first half of the year, when CPOreached as low as 693 ringgit ($182.37) in February, had forced farmers tocut down the use of fertiliser. This was another reason behind sloweroutput, he added.Plantation owners applied to replant around 190,000 hectares this year,which would take out some 500,000 tonnes of palm oil from the market, saidLiau.The MPOB said in June Malaysia's palm oil output is forecast toincrease by 3.4 percent to 11.2 million tonnes in 2001, far below marketexpectations of up to 12 million tonnes.($1=3.8 ringgit)