Palm oil production in Malaysia fell more than expected in November 2016 as trees remained stressed by adverse weather conditions, with prices poised for their biggest annual advance in six years, reports the Star Online.

Production of crude palm oil (CPO) dropped 6.1% to 1.57M tonnes in November from a month earlier, the Malaysian Palm Oil Board (MPOB) said on 14 December. Stocks rose 5.2% to 1.66M tonnes, below the 1.7M tonnes forecast in a Bloomberg survey. Exports fell 4.2% to 1.37M tonnes, the weakest level since June 2016, the report said.

Oil palm trees in Malaysia were taking longer than expected to recover from drought conditions caused by El Niño in 2015, and top global producer Indonesia was expected to consume more for biodiesel, prompting a bull rally.

“Supplies are tighter than expected and prices will remain firm until the first quarter of 2017,” the Star report quoted Ivy Ng, regional head of plantations research at CIMB Investment Bank Bhd, as saying.

Benchmark futures in Malaysia reached RM3,188 (US$717)/tonne in the second week of December, the highest level since May 2012. Prices could climb to RM3,300 in the first quarter of 2017, veteran industry analyst Dorab Mistry of Godrej International had said earlier.

The Star said oil palms typically enter a seasonally higher production cycle in the second half of the year that peaks between August and October, before dropping towards the end of the year and into the first quarter.

The lagging effects of El Niño had stunted crops in Malaysia, which may only produce 17.3M to 17.4M tonnes of crude palm oil for 2016, Mistry said. That would be the smallest output since 2010.