26/2/06 KUALA LUMPUR (AFP) - Malaysia will likely lose its long-held status as the world's top palm oil producer to Indonesia within the next two years, according to a leading industry figure.

"Based on our own forecast we believe that Indonesia's production will overtake Malaysia's. We don't believe it's going to take place this year, we feel that it will take place in 2007," Carl Bek-Nielsen told AFP.

Bek-Nielsen, vice chairman of major Malaysian palm oil producer United Plantations, attributed Indonesia's ascent to aggressive planting and the large number of palm oil trees reaching maturity.

"Indonesia has planted up huge areas of land and a lot of that area now is coming into maturity and they are continuously planting in new areas of landbank so they will be overtaking Malaysia's landbank," he said in a recent interview.

At the same time, Malaysian oil palm trees are undergoing a "biological yield cycle downturn" and production has also been affected by low rainfall.

So far this year, the first three months' palm oil output will be "significantly" lower than the same period in 2005, Bek-Nielsen said.

He forecast Malaysia's annual production this year at 14.95 to 15.25 million tonnes against Indonesian output of 15.0 to 15.1 million tonnes.

In future, Malaysia will lack the type of land needed for oil palm cultivation, Bek-Nielsen said.

"There is only a limited amount of land in Malaysia that can be taken up for oil palm cultivation in the future. Right now that stands at about 4.0 million hectares (9.9 million acres). Personally, I'll be surprised if that would exceed 5-5.5 million hectares in many, many years to come," he said.

Palm oil has been blamed for destroying vast swathes of jungle, pushing endangered animals such as the orangutan to extinction, and creating Southeast Asia's annual haze crisis as plantations are burned off.

Indonesian plans to create a massive new Chinese-funded plantation along virtually the entire Borneo border with Malaysia have stirred outrage among environmentalists.

But Malaysia's palmoil industry is generally seen as better organised and regulated than its neighbour's.

Bek-Nielsen said the Malaysian industry had to raise its production yields and ensure sustainable development.

"We should be trying to create as good a balance as possible between economy and ecology," he said.

While the local average industry yield is 3.85 tonnes of crude palm oil per hectare a year, top producers manage to consistently achieve more than 5.5 tonnes, he noted.

Theoretically, Malaysia's annual output could easily soar to 18 million tonnes if most producers can reach yields of 5.5 tonnes, he said.

Last year, Malaysia produced 14.96 million tonnes of crude palm oil which raked in some 28.6 billion ringgit (7.7 billion dollars) in export earnings for the industry.