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ndonesian palm oil producers hope the estimated decline in production, as a result of the prolonged dry season, will help raise crude palm oil (CPO) prices that have recently dropped to their lowest levels in five years.

The executive director of Indonesian Palm Oil Producers Association (Gapki) Fadhil Hasan said the fall in the production caused by the El Niño weather phenomenon could reduce the oversupply in the global market.

'€œWe hope so [that prices increase], but we can'€™t rule out other factors determining CPO prices, such as an economic slowdown and an oil price drop,'€ he told The Jakarta Post.

He said earlier that CPO prices would remain low this year due to the continued drop in crude oil prices as well as the expected decline in demand due to the global economic slowdown, particularly in China.

CPO prices have slumped in the past five years to around US$450 per metric tons at present from around $850 per metric tons in 2010, according to combined data from the World Bank and the Malaysian Palm Oil Council (MPOC).

CPO prices, meanwhile, have started picking up over the last three days to around $469 per ton on Friday'€™s close from around $459 per ton on Wednesday'€™s close, the MPOC data has shown.

Malaysia-based CIMB has previously released a report saying that the El Niño event was usually positive for CPO prices as the potential shortfall in supply caused by the drought would boost palm oil prices, especially if the event coincided with low stockpiles.

According to data from the CIMB, Malaysian CPO output plunged by up to around 14 percent year-on-year (yoy) when the El Niño struck with high intensity in the 1980s and slumped by around 3 percent when it struck with moderate intensity from 2009 to 2010, with the CPO prices rising.

The report stated, however, that it did not expect a major spike in CPO prices at present as it estimated there was currently a sufficient stock buffer for the edible oil.

Meanwhile, the Indonesian Chamber of Commerce and Industry'€™s (Kadin) deputy chairman for agribusiness and food, Franky Widjaja, said previously that this year'€™s El Niño would likely affect Indonesian CPO production.

'€œI think [CPO] production can plunge below 30 million tons next year because of effects from El Niño, as well as the haze crisis,'€ he said as quoted by kontan.co.id.

Indonesia, 'ۥwhich is the world'۪s largest CPO producer,'ۥ may produce around 28 million tons of CPO next year compared to a projected 33 million tons this year, he added.

El Niño, which can cause droughts, floods and fluctuating crop yields in the Pacific equatorial region, arrived in the Asian region in the middle of this year.

The Meteorology, Climatology and Geophysics Agency (BMKG) previously indicated that this year'€™s El Niño had increased intensity, reaching an index of 1.9, up from 1.6 in June.

The index, called the El Niño-Southern Oscillation (ENSO) index, is still below the peak index in 1997 that reached 2.59, according to the agency.

Indonesia suffered greatly from the 1997 El Niño, experiencing $2.45 billion in losses as drought-driven fires wiped out millions of hectares of forest and plantation areas.