Malaysia's palm oil production, dented by factors from hot weather to labour shortages, has fallen to its lowest for nearly three years, official data have revealed.

The world's second-ranked producer of the vegetable oil said that output in February came in at 1.16m tonnes, down 12.5% month on month.

While investors expected some decline for a month which is usually the weakest in Malaysia's palm oil production cycle, the scale of the decline, to the lowest since April 2009, was nearly twice as much as they had forecast.

The fall follows persistent concerns about the impact of floods and heat on Malaysian production, with the impact of poor weather often being felt months later in, for example, levels of female palm flowers.

The Malaysian Palm Oil Board, the industry regulator which produced Wednesday's data, has also warned of a shortage of manpower, blamed in part on strict Malaysian regulations on foreign workers.

Stocks tighten 

While exports also dipped – a reflection of lunar new year holidays in China, a big palm oil importer – the fall in production was reflected in a 10.9% slide in inventories, twice the rate the market had expected.

The fall in inventories, to 1.79m tonnes, left them at their lowest since October.

The data helped benchmark May palm oil add 26 ringgit to 2,676 ringgit in afternoon trade in Malaysia.

Premium over soyoil?

Prices were poised to above 3,000 ringgit a tonne if output continues to slow, potentially gaining a slight premium over soyoil, according to Thomas Mielke head of analysis group Oil World.

The comments, to a palm oil conference in Malaysia, followed an Oil World report on Tuesday which noted that, despite such a price reversal, buyers would be incapable of switching rapidly to soyoil.

"Consumers in importing countries have only limited potential to switch, due to the increasing domestic consumption of soyoil in Argentina, Brazil and the US in 2010 to satisfy growing requirements from the biodiesel industry," the report said.

Comparison of Mdex palm oil prices and Chicago soyoil shows that palm has not held a premium for at least four years.