Malaysia's Felda says palm output drops as El Nino bites

* CEO says Felda palm fresh fruit bunch yield down 17 pct

* Production hit by dry weather from El Nino

* Says crude palm oil prices to rise about 10 pct by Aug

* Expects to sort green certification for 15 mills by yr-end (Adds fresh CEO comment, detail)

By Emily Chow

KUALA LUMPUR, May 16 (Reuters) - Malaysia's Felda Global Ventures Berhad, the world's third largest palm plantations operator, said its output of the fresh fruit used to churn out palm oil has dropped 17 percent so far this year as dry conditions from El Nino hit crops.

A broad decline in harvests around the key-producing region of Southeast Asia will boost crude palm oil prices by up to 10 percent by August and then by as much as 20 percent further down the road, Felda's newly-appointed chief executive Zakaria Arshad said on Monday.

"Lower yields are due to the El Nino effect," Zakaria said at a media briefing. The El Nino weather phenomenon dries fields across swathes of Asia.

Zakaria said crude palm oil prices would climb to between 2,600 ringgit ($644.50) and 2,800 ringgit per tonne by August. They stood around 2,566 ringgit on Monday.

A Felda Group veteran of 32 years, Zakaria was appointed as the company's head in a surprise move in April.

He takes over as the palm industry comes under increasing pressure from environmental groups, who blame it for chronic deforestation, as well as for a polluting haze that often engulfs chunks of Southeast Asia.

In an interview with Reuters after the briefing, Zakaria said the company would push to get green certification for 15 of its processing mills by year-end.

It withdrew so-called 'certificates of environmental sustainability', granted by the Roundtable on Sustainable Palm Oil (RSPO), from all 58 of its mills in early May. The step came after RSPO suspended certification for rival plantation company IOI Group.

The RSPO is a body of consumers, green groups and plantation firms that aims to promote the use of sustainable palm oil products, and is used by many European buyers as the international sustainability benchmark.

"There's a huge number of people in the Felda Group ... if they are doing anything against RSPO, sooner or later my certificate will be withdrawn. Before this happens, it's good for me to look at my own house," said Zakaria, adding it would cost about 34.5 million ringgit over three years to certify all the firm's mills.

"The big buyers don't just cut off suppliers or purchases immediately. Normally they give us a chance to explain. That is what we are doing."

He added that buyers would need to pay more of a premium for palm from certified producers.

"The premium is less and less, and the cost to fulfil RSPO is getting higher and higher," he said

"My ideal premium is around $50 per tonne, now ... it's about $20."

Meanwhile, Zakaria said a long-pending transaction to take a 37-percent stake in Indonesian firm PT Eagle High Plantations Tbk for $680 million was still under negotiation and that there would not be a deal in the immediate future.

The production of palm oil, used in everything from processed foods to cosmetics, is key to the economy of Malaysia, as well as its neighbour Indonesia. ($1 = 4.0340 ringgit) (Reporting by Emily Chow; Editing by Joseph Radford)