November 12, 2004

Malaysia:  Palm Oil Yields Trending Higher, Rainfall Normal

Rainfall in Malaysian palm oil regions was very close to normal during the third quarter of 2004 (Jul.-Sept.).  This is expected to have a neutral effect on palm oil yields.  For the marketing year 2004/05 (Oct.–Sept.), yields are expected to be below trend from October to March, but move above trend from April to September.  This projection is based on the lagged rainfall effects from precipitation occurring over the past 10 quarters.

Malaysia’s palm oil yield was surprisingly high in the third quarter 2004, despite rainfall levels that were well above optimal levels in the fourth quarter of 2003.  The third quarter yield in 2004 was 1.19 tons per hectare, compared to the average yield for the third quarter over the last 5 years of 1.06 tons.  Normally, when rainfall averages more than 300 millimeters per month, it inhibits pollination, thus reducing yield 6 to 9 months later.  Not enough is known about the daily pattern of rainfall or sunshine illumination levels to determine what may have mitigated the expected negative effects of the heavy rainfall.  Additionally, upward trending yield, because of improved tree genetics and cultural practices, may have countered the effects of excessive precipitation.

Yields are expected to be somewhat subdued over the next two quarters through March 2004, mostly because of the lagged effect of below normal rainfall in the first and second quarters of 2004.  However, yields are expected to be strong from about April through September 2005 because of good rains in late 2002 and 2003 that benefited early floral development.

Ratio of Palm Kernel to Palm Oil Declining  

One factor that has helped palm oil yields increase over the last ten years is that the ratio of palm kernel to palm oil has been decreasing.  The fruit of new tree varieties has a higher proportion of flesh (from which the palm oil is obtained) relative to kernel (from which palm kernel oil is extracted).  Generally, palm oil is used as cooking oil while palm kernel oil is used in making processed foods.

Model's Projection for 2004/05 Is Above Average

Using Malaysian rainfall data, yield for 2004/05 (Oct.-Sept.) is estimated by the Malaysia Rainfall Regression Model (MRRM) at 3.79 tons per hectare.  This is above the 20 year average of 3.65 tons per hectare, but below the 10-year trend of 4.20 tons per hectare.  This projection would give a production level of 13.1 million tons (using a harvested area of 3.46 million hectares).  The projected level is less than the 14.0 million tons currently forecast by USDA.  The USDA estimate is higher than the MRRM projection primarily because the model uses 20 years of data.  Within this time period a kink occurs in the yield curve around 1992.  From this year on, the yield curve exhibits a strong upward trend.

Note: The MRRM linear regression model uses rainfall lagged three quarters, one-year cumulative rainfall lagged 6 quarters, and time as independent variables regressed against yield.  Because of the characteristics of linear regression, the model continues to increase projected yields even as rainfall becomes excessive; thus, the model tends to overstate yield when average monthly rainfall lagged three quarters is above 300 mm, and understate yield when rainfall is optimal.  A variety of information sources are used in determining official USDA estimates for Malaysian palm oil.

Oil palm production potential is reduced when trees are exposed to stressful conditions.  Low moisture is the most common stressful condition oil palm faces, so monitoring rainfall is useful in predicting palm oil yield levels.  The most critical periods for oil palm are 24 months, 18 months, and 6 months prior to maturation of the fruit bunches.  Twenty-four months before fruit maturity is when sex selection of the flowers occurs.  If oil palm trees are subjected to stress at this critical time, a higher proportion of the flowers become male flowers, which do not become fruit.  Eighteen months before fruit maturity is the time of floral abortion.  If oil palm trees are subjected to stress at this critical time, fewer flowers develop so a smaller number of fruit is produced.  Six months before fruit maturity is the time of pollination.  If oil palm is subjected to stress at this critical time, less pollination occurs and a smaller number of fruit is produced.

For more information, contact Paul Provance
with the Production Estimates and Crop Assessment Division, at (202) 720-0881