Malaysia's top palm oil producer warns El Nino may hit output

KUALA LUMPUR: Malaysia's palm oil output in 2023 could be lower than expected if El Nino weather pattern develops in the second half of the year as forecast by some weather agencies, the country's biggest palm oil producer FGV Holdings told Reuters on Tuesday.

Malaysia is the world's second biggest producer of palm oil and fall in its production could lift palm oil futures already trading near their highest level in four months.

Malaysia production is expected to rise to around 19 million tonnes from 18.45 million tonnes in 2022, but the output could drop marginally if El Nino develops as forecast, Nazrul Mansor, chief executive of FGV told Reuters in an interview.

An El Nino episode usually results in below-average rainfall in main palm oil producers Indonesia and Malaysia, cutting yields and pushing up global prices.

"Climate change is making managing plantations a difficult job. There was flooding earlier this year and if El Nino develops, then there would be a period of dry spell in the second half of year," he said.

The bigger impact of El Nino on production would be felt in 2024, Mansor said.

FGV is preparing for El Nino by planning water management and has developed drought-resistant varieties, he added.