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South-east Asian palm oil problems could hit consumers worldwide

Published on May 11, 2014 12:10 PM
Workers stand near palm oil fruits inside a palm oil factory in Sepang, outside Kuala Lumpur, on Feb 18, 2014. -- FILE PHOTO: REUTERS

JAKARTA (AFP) - South-east Asia's booming palm oil industry is facing a double blow from a recent drought and a possible El Nino weather phenomenon later this year, with analysts warning a production shortfall could spark a jump in consumer goods prices.

From biscuits to shampoo and make-up, the oil has become a key ingredient in numerous products found on supermarket shelves across the globe, fuelling rapid growth of the industry in the world's top two producers, Indonesia and Malaysia.

But a drought in January and February in the countries, which provide some 85 per cent of the world's palm oil and are home to vast plantations where swathes of rainforest used to stand, has raised the prospect of a drop in production later this year.

Dry weather does not have an immediate effect on the fruit, which needs to be deprived of water for some months before any impact is noticeable.

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