06/12/2011 (Bloomberg) - Palm oil output in Malaysia, the world’s second-biggest producer, probably fell from a two-year high last month after the peak harvest season ended, according to a Bloomberg News survey.

Output fell 11 percent to 1.7 million metric tons in November from 1.91 million tons in October, according to the median estimate in the survey of four analysts and two plantation companies last week. Production was 1.46 million tons a year earlier, according to the Malaysian Palm Oil Board, which is scheduled to publish the official estimates on Dec. 13.

Declining output may pare stockpiles and stem a 18 percent slide in palm oil prices this year. Futures may rally to a four- year high of 4,000 ringgit ($1,277) a ton in the next seven months as growth in output decelerates in Indonesia and Malaysia, the biggest growers, Dorab Mistry, director of Godrej International Ltd. said Dec. 2.

“The decline in production is owing to the off-season slowdown and certain disturbances due to heavy rains,” Murali Krishna P.V., chief executive officer of TransGraph Consulting Pvt., an industry consultant, said in an e-mail. The reduction in palm oil supply will be offset by improving soybean and rapeseed crops, barring damages from bad weather, he said.

Output seasonally peaks between July and October, before tapering off. Heavy rains during the year-end monsoon period can disrupt harvesting, further slowing production.

Stockpiles Drop

Inventories probably fell 1 percent to 2.08 million tons, staying above the 2 million-mark for a third straight month, according to the survey. Exports dropped 12.5 percent to 1.61 million tons, the survey showed. Shipments fell 8.8 percent to 1.53 million tons in November compared with 1.68 million tons in October, surveyor Intertek said Nov. 30.

Palm oil for February delivery gained 2 percent to 3,122 ringgit per ton on the Malaysia Derivatives Exchange yesterday. The most-active contract has gained 2.7 percent last month.

“Because of the high price people were not willing to buy substantially,” said Ivy Ng, an analyst at CIMB Group Holdings Bhd. “Exports are probably slowing but could pick up next month because Chinese New Year is just around the corner.” The Lunar New Year will fall at the end of January.

Futures in Malaysia may advance to 3,300 ringgit a ton by January and “gradually” climb to 4,000 ringgit by June, Mistry said, keeping a forecast made in July. Malaysian production may be “flat” in 2012, between 18.6 million and 19 million tons, while output in Indonesia may reach 26.5 million tons on new acreage, he said.

Output probably gained 11 percent to 17.5 million tons in the 11 months through November from a year earlier, according to the survey. Production in Malaysia may climb 2.2 percent to 18.7 million tons next year from an estimated 18.3 million tons this year on rising yields and “speedy” replanting of aging trees, the nation’s finance ministry said on Oct. 7.

“Prices might remain under pressure in the next fortnight owing to higher stockpiles and slack export inquiries,” said Vimala Reddy, an analyst at Karvy Comtrade Ltd.

Palm Oil Output in Malaysia Drops as Peak Harvest Season Ends.