30/03/2012 (Reuters) - Malaysian palm oil futures slipped for a second day on Thursday, as traders booked more profit from a rally this week, although losses were curbed by soybean supply fears in South America and firm export outlook for palm oil.

Palm oil could not breach the psychological 3,500 ringgit level this week, especially when market players were cautious ahead of the U.S. Department of Agriculture's quarterly inventory report and planting forecast due on Friday.

"We see that palm oil prices have come to a one-year high, so it's not surprising that some profit-taking activities start to kick in, especially now as we are at the end of the month, some book squaring is going to happen," said Ker Chung Yang, an analyst at Phillip Futures in Singapore.

"There could be some positioning ahead of this coming Friday's reports. Although the market is speculating that there could be more planted acres for corn, the reports could turn out to be a surprise and soybean prices could subsequently be weighed on that."

Benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange closed down 0.5 percent at 3,456 ringgit ($1,127) per tonne. This week the market went as high as 3,497 ringgit, a level unseen since March 10 2011.

Traded volumes were thin at 20,280 lots of 25 tonnes each, compared to the usual 25,000 lots.

Palm oil investors are watching closely on the acreage battle between corn and soybean because a smaller planted area for soybean could boost demand for palm oil, which competes with crushed soybean oil in the vegetable oil market.

Malaysian export data for the first 25 days of March pointed to an improvement in buying interest for the tropical oil compared to a month ago, and traders are expecting exports for the full month to end higher.

Market players are also focusing on Malaysia's palm oil supply, which could be lower in March on the back of seasonality and the effect of biological stress.

A lower palm oil production may push up prices further as global oilseed supply is tight especially as a drought in South America has disrupted soybean production.

Oil prices held near $124 a barrel on Thursday on concerns about the loss of Iranian oil despite the prospect of a release of strategic oil reserves in the West and renewed promises of additional supply from Saudi Arabia.

In other vegetable oil markets, the most active U.S. soyoil contract for May lost 0.1 percent in Asian trade while the most active September 2012 soyoil contract on China's Dalian Commodity exchange was trading down 0.8 percent.  

  Palm, soy and crude oil prices at 1004 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      APR2    3483   -17.00    3465    3500     214
  MY PALM OIL      MAY2    3465   -17.00    3451    3483    1971
  MY PALM OIL      JUN2    3456   -17.00    3445    3477   11141
  CHINA PALM OLEIN SEP2    8664   -66.00    8620    8734  241496
  CHINA SOYOIL     SEP2    9642   -74.00    9606    9722  589938
  CBOT SOY OIL     MAY2   54.57    -0.03   54.44   54.83    8184
  NYMEX CRUDE      MAY2  104.92    -0.49  104.89  105.70   16785

  Palm oil prices in Malaysian ringgit per tonne
  CBOT soy oil in U.S. cents per pound
  Dalian soy oil and RBD palm olein in Chinese yuan per tonne
  Crude in U.S. dollars per barrel
  ($1=3.066 ringgit)