El Nino to Hit Palm Oil

A moderate El Nino weather pattern would reduce palm oil output by as much as 12 percent in Malaysia, the world’s second-largest producer, IOI Corp. (IOI) Chief Executive Officer Lee Yeow Chor said.

Prices may advance to a range of 2,650 ringgit ($827) a metric ton to 2,850 ringgit from August if the event occurs, Lee said in an interview in Kuala Lumpur. Futures fell to an eight-month low of 2,369 ringgit on 11 June. An El Nino pattern as severe as in 1997-1998 may cut production by as much as 15 percent, Lee said, without specifying a period for the decline.

Forecasters from the U.S. to the United Nations have warned such an event may happen this year, while Goldman Sachs Group Inc. says disruptions associated with El Ninos have been most important for cocoa, coffee, sugar and palm oil. An El Nino pattern, which can roil agricultural markets worldwide as farmers contend with drought or too much rain, may be established by August, according to just over half of the climate models surveyed by Australia’s Bureau of Meteorology.