02/07/2012 (Reuters) - Malaysian crude palm oil ended lower on Wednesday, as market caution and expectations of higher stocks in No.2 producer Malaysia trumped lingering weather fears in the U.S. Midwest.

The U.S. soy-growing region received little relief from the persistent dryness, with the damage being reflected by the U.S. Department of Agriculture's downgrade of the soybean crop condition by 2 percentage points from the previous week.

But cautious sentiment dominated ahead of the European Central Bank's Thursday meeting and as markets waited to see if there is any fresh monetary stimulus from the U.S. Federal Reserve at the end of its two-day meeting later on Wednesday.

Palm oil traders were also looking for further clues to Malaysia's July stock levels after exports showed some signs of slowing.

"A few months back, stocks were above 2 million tonnes and last month stocks were surprisingly a little weak, so this month stock levels should pull up a little bit," said a trader with a foreign commodities brokerage in Kuala Lumpur.    

The benchmark October palm oil futures on the Bursa Malaysia Derivatives Exchange lost 1.2 percent to close at 2,945 ringgit ($946) per tonne.

Traded volumes picked up to 27,269 lots of 25 tonnes each, compared to the usual 25,000 lots after a quiet morning trading session.

Malaysian palm oil exports fell from a month ago as festival demand eased. Cargo surveyor Intertek Testing Services reported a decline of 15 percent and another cargo surveyor, Societe Generale de Surveillance, reported a steeper drop of 19 percent.

Slower exports could ease pressure on tightening stocks in Malaysia, which fell to a 14-month low in June.

Traders are also looking out for the possibility of El Nino returning to Southeast Asia as the adverse weather condition could hurt production for top producers Malaysia and Indonesia.

Major vegetable oil importer India has set a new base import price on refined palmolein at $1,053 per tonne, the government said in a statement on Wednesday, making imports of the refined palm oil costlier in a bid to protect domestic refiners from cheap Indonesian exports.   

In related news, global commodities trading giant Cargill Inc said on Tuesday a group of employees at its vegetable oils trading desk in Singapore had left the company but daily business operations remained unaffected.

Brent crude strengthened to $105.70 per barrel by 0830 GMT, recovering from an earlier drop as softer manufacturing data from China chipped away at fragile market sentiment. This raises palm oil's prospects to be diverted to making biodiesel.

In other vegetable oil markets, the most active U.S. soyoil contract for December delivery had lost 0.2 percent by 1014 GMT. The most active January 2013 soyoil contract  on the Dalian Commodity Exchange closed 0.8 percent higher.

  Palm, soy and crude oil prices at 1014 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      AUG2    2908   -47.00    2908    2965     155
  MY PALM OIL      SEP2    2932   -33.00    2915    2988    2235
  MY PALM OIL      OCT2    2945   -35.00    2924    3000   16613
  CHINA PALM OLEIN JAN3    7854    +8.00    7840    7920  230106
  CHINA SOYOIL     JAN3    9570   +74.00    9532    9632  546482
  CBOT SOY OIL     DEC2   53.29    -0.11   53.13   53.88    7743

  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
  ($1=3.11 Malaysian ringgit