10/02/2010 (Agrimoney.com) - An unexpectedly large fall in Malaysian palm oil production last month helped palm oil prices extend their winning streak to seven trading days, despite data showing a smaller cut in inventories than traders had expected.

Palm stocks in the world's second-ranked producing state were, at 2.00m tonnes, 10.7% lower last month than in December, the Malaysian Palm Oil Board said.

The rate of decline, while significant by historic levels, fell short of the 11.7% that traders had predicted, and left inventories some 200,000 tonnes higher than foreseen.

Output slide
However, palm oil production tumbled by 13.1% to 1.32m tonnes, leaving it below both analysts' forecasts and output a year before.

While oil palm plantations are typically less productive early in the calendar year, the current harvest has stimulated particular concerns because of the occurrence of an El Nino weather pattern, which typically brings hotter temperatures to Malaysia.

Besides sapping palm oil yields, warmer weather can curb the development of the female flowers that produce palm fruits.

Furthermore, Malaysia has also been dogged by heavy rains which have hampered harvesting, besides hindering the transport of fruits and raw oil for the next stage of processing.

Exports pick up
The data from Malaysia's palm sector regulator also showed the country's exports of the vegetable oil hitting 1.46m tonnes, a figure 19.4% higher month-on-month and 7.8% higher than in January last year.

And exports maintained growth this month, hitting 410,459 tonnes in the first 10 days, 18.5% higher than in the same period in January, separate data from cargo surveyor Societe Generale de Surveillance said.

In Kuala Lumpur markets, benchmark April palm oil closed up 2 ringgit at 2,563 ringgit a tonne, extending February's 100% record of positive closes.

Palm oil has now rallied 7.1% from a two-month, intraday low reached on January 27.