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UPDATE 1-Palm oil to rise on El Nino as industry prepares for La Nina - Felda CEO
May 24, 2016 / 9:41 AM / 2 years ago

UPDATE 1-Palm oil to rise on El Nino as industry prepares for La Nina - Felda CEO

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By Emily Chow

KUALA LUMPUR, May 24 (Reuters) - Malaysia’s Felda Global Ventures chief executive Zakaria Arshad said on Tuesday crude palm oil prices will rise in 2016 because of lower yields from the impact of the El Nino weather phenomenon.

Palm oil is expected to average 2,500 ringgit ($607) per tonne in 2016, up from 2,275 ringgit last year, Zakaria said at a media briefing for Felda’s results. The average is higher than the 2,400 ringgit per tonne forecast in a Reuters poll in February.

The El Nino weather event brings dry weather across Southeast Asia, denting palm’s fruit yields and lowering output in Indonesia and Malaysia, the world’s two largest producers.

Preparations for the La Nina weather pattern could minimise the decline in palm oil output to between 0.2 million and 0.3 million tonnes, said an official from Felda, which is the world’s third-largest palm plantation operator.

Leading industry analyst James Fry had earlier estimated that the La Niña could reduce global palm oil output by 0.4 million tonnes per year.

“Ample preparation work can reduce the impact of the La Niña,” Zakaria said.

The Australian Bureau of Meteorology (BOM) said on Tuesday there was a 50 percent chance of a La Nina weather pattern happening, which brings rains across Asia. The BOM also said that the El Nino, the strongest in 20 years, had ended.

Felda on Tuesday reported a first-quarter net loss of 65.5 million ringgit ($16 million) due to low yields from the El Nino, compared with 3.57 million ringgit in net profit over the same period last year.

Its revenue stood at 3.76 billion ringgit versus 2.7 billion ringgit at the end of March 2015.

Benchmark palm oil prices rose 0.7 percent to 2,510 ringgit per tonne on Tuesday afternoon. ($1 = 4.1200 ringgit) (Reporting by Emily Chow, Writing by Rozanna Latiff; Editing by Christian Schmollinger)

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