Thursday, February 3, 2011

Malaysia palm oil estates flood, prices rise

Malaysia palm oil estates flood, prices rise

Mon Jan 31, 2011 5:50am EST

* Floods kill two, 31,000 evacuated

* Palm oil deliveries slow as roads get cut off

* Chief Minister of Johor expects floods to be more severe

* Palm oil prices at one week-high (Adds paragraphs on food prices)

By Niki Koswanage

KUALA LUMPUR, Jan 31 (Reuters) - Massive floods in key palm growing areas of Malaysia disrupted shipments, driving prices to a one-week high as forecasters predicted further rains that may impact supplies, potentially adding to Asia's food price spiral.

Two days of rains caused the worst floods in this Southeast Asian country in four years, killing two people and making 31,000 homeless as well as cutting rail links with Singapore.

The floods in Malaysia follow a string of global weather events from drought in Russia last summer to recent floods in Australia that could see up to half of the country's 2010/11 wheat crop downgraded to feed quality, boosting Chicago wheat prices to a 29-month high.

In response, major importing nations are scrambling to build stocks and cut duties to combat inflation. Indonesia last week suspended rice and soybean import duties.

Rains linked to the La Nina weather pattern submerged swathes of southern Johor state, an area 27 times the size of neighbouring Singapore, bringing shipments in Malaysia's second largest producing region to a near standstill.

"My lorries are stuck. There is water everywhere and I cannot send palm fruits out of the estates," one planter told Reuters from Segamat, a town in Johor surrounded by flooded oil palm plantations.

Planters in Johor have delayed 30,000 tonnes to 40,000 tonnes of the vegetable oil over the past two days as rising floods cut off access roads.

Overflowing rivers on Borneo island have also delayed shipments of as much as 60,000 tonnes of crude palm oil headed to refineries in Sabah, the Malaysian state that is the country's number one producer, as trucks were unable to ply waterlogged estate roads, said two planters.

Palm oil prices on the Bursa Malaysia Derivatives exchange rose as much as 2 percent to 3,775 ringgit a tonne ($1,235), exacerbating already tight supplies of palm oil which is widely used as a cooking oil across the Middle East and Asia where governments are scrambling to contain soaring food prices.

"We are going into a period of seasonally lower (palm oil) yields, there is little left there," said Ben Santoso, an analyst with Hwang-DBS in Singapore.

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