12/11/2009 (Alibaba.com), Kuala Lumpur - Heavy rains threaten to reduce November's palm oil output in Malaysia by a quarter as rising moisture levels sap yields and possible floods make tough the transport of the vegetable oil to refineries and ports.

Estate owners and traders said on Thursday that production could fall as low as 1.48 million tonnes in November from a month ago as monsoon rains approach southern Malaysia's key palm oil producing state of Johor Malaysia from the northeast.

For a related story on Malaysia's October palm oil data, click on.

"Production was unusually high last month and it is set to fall very steeply because rains will increase the moisture content of the palm fruits," said a plantation owner in Johor. "And judging by previous years, floods will definitely appear."

Johor accounts for nearly 20 percent of Malaysia's total annual production of about 17 million tonnes and often experiences floods towards the end of the year that cut off roads leading to estates.

Sabah, the top oil state on Borneo island that accounts for more than a quarter of production, has also experienced heavy rains, and planters say in some areas yields have fallen by 30 to 40 percent and plantation roads were submerged.

"We were just recovering from El Nino, biological tree stress and it's now wet weather again," said an official with a listed plantation company in Sabah.

Wet weather last year hit yields in Sabah and brought monthly overall production as low as 1.2 million tonnes in February, lifting benchmark palm oil prices in Malaysia and narrowing the spread with rival soyoil.

Plantation officials say they are offering crude palm oil at a discount as the moisture content has gone up to 0.4 percent from the usual 0.25 percent specification.

Discounts range from 200-300 ringgit a tonne of crude palm oil that now retails at 2,160 ringgit ($638.3).

If moisture content rises past 0.5 percent, buyers can reject shipments and plantations will usually offer further discounts to clear their stock, traders said.