28/08/2007 (Times Of Oman), KUALA LUMPUR – Malaysia, the world's top producer of palm oil, said Monday that output in 2007 will likely fall to 14 million tonnes, the lowest in two years and below expectations after heavy flooding.

Sabri Ahmad, chairman of the Malaysian Palm Oil Board, told reporters that production was lagging behind the first six months of 2007 and would likely be lower than the previous estimate of 16.5 million tonnes for this year.

"The decrease is due to floods in Johor state and the normal cycle of oil palm trees," he said on the sidelines of a palm oil industry gathering.

Palm oil production in 2006 was 15.8 million tonnes, up from 14.96 million tonnes in 2005.

Officials, however, remained positive about the outlook of the industry with prices expected to remain high until next year, led by rising demand from China, India, the United States and Europe.

"(Prices) will remain buoyant over the immediate future or at least until next year. It will not go down," said Peter Chin, Malaysia's plantation industries and commodities minister.

Palm oil prices now average 2,500 ringgit (735 dollars) per tonne.

Chin warned industry players that land for growing the crop was running short in Malaysia, the leading global exporter of palm oil. "In Peninsula Malaysia there is hardly any suitable land left -- we cannot turn our farmers to plant oil palm trees," he said, adding that there was still land in Sabah and Sarawak on Borneo island, which is shared with Indonesia.

Environmentalists claims that oil palm plantations destroy vast swathes of tropical forest, pushing endangered animals like the orangutan to extinction.

Oil palm cultivation occupies 67 percent of Malaysia's total agricultural land, and some 500,000 people are engaged in the sector. Malaysia hopes palm oil production will hit 20 million tonnes by 2020.

Indonesian Vice President Jusuf Kalla has said that his country plans to rise from second place to become the largest palm oil producer by 2008, amid strong demand from the global food, bio-fuel and chemicals industries.

Malaysia and Indonesia account for 85 percent of world production.