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By Niki Koswanage and Angie Teo

 KUALA LUMPUR, Feb 10 (Reuters) - Malaysia's palm oil stocks are poised to drop further this month after hitting a six-month low in January as heavy rains and floods continue to dampen output. Concerns over low yields after massive floods swamped key Malaysian oil palm growing areas in end January have triggered a rush for the vegetable oil used for cooking, as countries struggle to keep food prices low and ward off public unhappiness with inflation. Traders said this month's rush for palm oil was in part due to some restocking activity by China after the Lunar New Year break and the resulting drawdown in stocks will further lift palm oil futures, currently trading at a three-year high. "I won't be surprised if the key 4,000 ringgit ($1,316) level gets breached soon," said a trader with a foreign commodities brokerage. "Stocks are pretty tight and export demand will become much better."The Malaysian Palm Oil Board (MPOB) said on Thursday that January stocks in the world's No. 2 producer of the vegetable oil fell 12.2 percent to 1.42 million tonnes from December, worse than forecasts for a decline of 10.2 percent in a Reuters survey. Palm oil production in the Southeast Asian country dropped 14.2 percent to 1.06 million tonnes, as heavy rains and floods in key oil palm growing areas stalled harvesting and cut off estate roads. "Palm oil production is expected to seasonally fall further in February 2011, but to recover thereafter," Credit Suisse analyst Tan Ting Min said in a note issued after the MPOB data release. "The market is closely watching the weather in South America and the U.S. planting intentions report “.But in the immediate term planters are concerned that prolonged exposure to moisture could turn the fruits rotten, hurting yields in the next two to three months.January exports stood at 1.21 million tonnes, much higher than production, the MPOB said, although traders and analysts are expecting a much stronger February shipment data as emerging market economies scramble to secure supplies to avoid further price rises in cooking oil. Reinforcing the trend, cargo surveyor Intertek Testing Services reported a 45.7 percent jump in Malaysian palm oil exports for Feb. 1-10 versus the same period a month ago. Another surveyor, Societe Generale de Surveillance, pegged the increase at 28.5 percent. Thailand, usually self-sufficient in palm oil, announced plans last week to buy 120,000 tonnes of crude palm oil from Malaysia or Indonesia, the top two producers, to address a cooking oil shortage.  The move came as Malaysia faced its worst floods in four years, prompting traders to speculate that orders may shift to Indonesia, which has not been so badly affected. "Refiners in Malaysia are also ordering Indonesian palm oil to meet their orders for this month and next month," said a refiner in southern Malaysia. "But let's not forget that Indonesian production is not limitless, there will be a general feeling of tight supplies."          

From this article,I conclude that there are related in DEMAND and SUPPLY:

DEMAND is the quantity of a good or service that buyers are willing and able to purchase at different prices in a period of time in a given market holding other non-price factors constant.CHANGE IN DEMAND is a change in quantity demanded at each possible price and is caused by changes in factors other than the good`s or the product`s own price.SUPPLY  is the quantity of a good that is offered for sale at all possible prices.CHANGE IN SUPPLY is direct relationship between the price of a good  and the quantity of  the quantity of the good supplied. There are many factors or variables which can shift the market demand and supply curve. From this article, we find the factors that influence the  supply and demand is seasonal.“Palm oil production in the Southeast Asian country dropped 14.2 percent to 1.06 million tonnes, as heavy rains and floods in key oil palm growing areas stalled harvesting and cut off estate roads.  "Palm oil production is expected to seasonally fall further in February 2011, but to recover thereafter," Credit Suisse analyst Tan Ting Min said in a note issued after the MPOB data release”  http://in.reuters.com.

This article can refer at http://in.reuters.com/article/2011/02/10/malaysia-palm-mpob-idINL3E7DA0AD20110210