Palm Oil Output in Malaysia May Gain to Record for Second Year

Palm oil output in Malaysia, the second-largest producer, may climb for a second year to a record in 2012 on rising yields and “speedy” replanting of aging trees, according to the nation’s finance ministry.

Production may gain 2.2 percent to 18.7 million metric tons next year, from an estimated 18.3 million tons this year, the ministry said in its Economic Report for 2011-2012 today.

Rising supplies may pressure prices, which have fallen 26 percent this year, and help cap global food costs that jumped 16 percent in the past year, according to the United Nations. The tropical oil used in everything from cookies and potato chips has slumped this year on bigger harvests and concern that a global slowdown may curb demand.

Malaysia’s palm oil exports may reach 70 billion ringgit ($22.1 billion) this year, Plantation Industries and Commodities Minister Bernard Dompok said yesterday.

Palm oil on the Malaysia Derivatives Exchange may average 3,200 ringgit a ton this year, the report said. That compares with an average of about 3,310 ringgit so far this year, according to Bloomberg data.

Rubber production may advance 4 percent to 1.04 million tons next year as steady prices spur growers to expand planting, the ministry said. Output will rise 6.5 percent to 1 million tons this year as small-holders are expected to increase tapping of trees to benefit from higher prices, it said.

The planted area probably increased 2.7 percent to 1.05 million hectares (2.59 million acres) in 2011, with new plantations in Sabah and Sarawak, the report said. Malaysia is the world’s third-largest rubber producer.

Rubber futures in Tokyo, down 24 percent this year, more than tripled in the previous two years as rising global vehicle sales boosted tire demand. Global demand may expand at a faster pace, led by strong vehicle sales in China, which will help sustain rubber prices, the finance ministry report said.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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