Flood-hit areas in Malaysia, the second-largest palm oil producer, may see showers and storms over the first week of 2015, according to the national weather agency, while a U.S.-based forecaster said although more rain is on the way the region may receive less than initially expected.

Isolated showers and storms are forecast for Pahang, Kelantan, Terengganu, Johor and Perak over the next seven days, according to data from the Malaysian Meteorological Department posted on its website on Jan. 1. Models may be overdoing the outlook for wetness and damage to palm oil may be averted, Bethesda, Maryland-based Commodity Weather Group said Dec. 31.

Palm oil rallied this week to the highest level in almost two months on concern the wetter-than-usual weather that stretches from southern Thailand, through Malaysia and into Indonesia may hurt supplies. The floods displaced hundreds of thousands, damaged properties and prompted the government in Malaysia to prioritize flood-mitigation works. Palm oil output may have dropped 20 percent last month as the flooding compounded a seasonal slowdown, RHB Investment Bank Bhd. said.

“Malaysian palm oil rains still slated to increase next week, but dying tropical storm raises doubts,” Commodity Weather Group said. “The tropical storm has dissipated. Models may be overdoing wetness next week, and damage may be averted.”

Palm oil for March delivery closed at 2,267 ringgit ($648) a metric ton on Bursa Malaysia Derivatives in Kuala Lumpur on Dec. 31. The price rallied to 2,308 ringgit on Dec. 29, the highest since Nov. 4. Last month, it advanced 4.3 percent, paring an annual decline, as the floodwaters spread.

Relief Centers

In Malaysia, the number of evacuees housed in relief centers dropped to 111,855 today, down from 150,202 yesterday, state news agency Bernama reported, citing government figures. The loss of public properties from the floods in Kelantan is estimated at 1 billion ringgit, the New Straits Times said, citing International Trade Minister Mustapa Mohamed, who’s coordinating relief efforts in the northeastern state.

Malaysian palm oil output in December may be 20 percent below the 1.75 million tons produced in November, according to RHB analyst Alvin Tai. Production may have dropped 15 percent to 20 percent last month because of the floods and seasonal slowdown, the Malaysian Palm Oil Board estimated yesterday.

Flood-mitigation projects will be prioritized in the central government’s 2016-2020 plan, the Star newspaper reported today, referring to the development blueprint issued every five years. The report cited Prime Minister Najib Razak.

To contact the reporter on this story: Niluksi Koswanage in Kuala Lumpur at nkoswanage@bloomberg.net

To contact the editors responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.netRamsey Al-Rikabi

Source : Bloomberg