BANGKOK, July 14 Asia Pulse - The lingering drought has had a majoreffect on Thailand's fruit production and crude palm oil yields, accordingto the country's largest exporter of crude palm oil, Thai Univanich PalmOil Pcl (SET:UVAN).Univanich, one of Thailand's leading oil palm plantation and fruitprocessing companies, said in a release to the Stock Exchange of Thailandtoday that the severe drought, which started in December 2004, hadresulted in a decline in fruit production and oil yields in the secondquarter of 2005.

It said the dry season, which lasted five months, was the worst since thelast El Nino episode in 1997-98.

Despite environmental challenges, Univanich said it was able to increasecrude palm oil (CPO) production by 16.1 per cent on-year in the first halfdue to the commissioning of a new crushing mill in late 2004.

However, the increase was not enough to meet its budget expectation, whichhad aimed at a CPO production increase of 35.6 per cent in the period.

The company said the drought had led to record competition for purchasedfruit in the palm oil crushing industry. As a result, CPO prices tumbled20 per cent in the first half of 2005 compared to a year ago.The average selling price fell from Bt20.31 (48 US cents) per kilogram toBt16.24 due to higher stocks of palm oil in Thailand and overseas, itsaid.

Palm oil stocks in Thailand totalled 151,122 tonnes at the beginning ofthis year, up from 114,931 tonnes at the beginning of 2004.

However, domestic palm oil stocks have since declined, totalling 125,000tonnes in May, due to the drop in production and the continued growth inconsumption.

Univanich said stocks are expected to decline further in June and July,especially if some palm oil is diverted for biofuel or biodiesel usage.

As a result of these lower stocks, the company said palm oil prices hadbegun to rise again.