26/09/2010 (Bloomberg) - Palm oil output in Malaysia, the world's second-biggest producer, may exceed 18 million metric tons next year as adequate rains improve yields, according to the country's trade group.

Production of the tropical commodity may total 17.7 million to 17.8 million tons this year, Yong Chin Fatt, chairman of the Palm Oil Refiners Association of Malaysia, said at a conference in Mumbai. That's little changed from 17.6 million tons in 2009 because of El Nino-induced dry weather earlier this year and the onset of La Nina that threatens to flood the major growing areas.

Output this month may rise by as much as 4 percent, causing a "slight" increase in stockpiles, Fatt said. Production in August rose 5.7 percent to 1,605,662 tons, the fourth monthly gain, and inventories jumped 23 percent to 1,723,262 tons, the country's palm oil board said Sept. 15.

The commodity has jumped 18 percent from an eight-month low on July 7 on optimism that the festival demand in Asian nations will increase consumption. December-delivery futures added 1.1 percent to 2,701 ringgit ($873) a ton on Sept. 24, rounding off a fourth week of gains.

There's a "good possibility" of prices increasing by 200 ringgit as excess rainfall may disrupt harvests, Fatt said. The commodity may trade between 2,600 3,000 ringgit for the rest of the year, he said.