* Prices down 14.8 pct this year, biggest drop since 2012
* Palm oil holds on to December's gain as floods hit supply
* May retrace further to 2,245 rgt - technicals

01/01/2015 (Reuters) - Malaysian palm oil futures fell on Wednesday, but held on to this month's strong gains as monsoon floods curb output in Malaysia, although the market recorded a 15 percent drop this year due to plentiful global edible oil supplies.

The flooding could result in palm oil output declining by around 15 percent to 30 percent in December, Douglas Uggah Embas, the country's commodities minister, said on Wednesday.

The market is up 4.3 percent this month, its biggest rise since September, as production is likely to remain affected well into the first quarter of 2015.

"The nearby months have a premium to the forward months because the flood issue is so severe that people are expecting disruption to supply in the nearby months," said one palm oil trader with a foreign commodities brokerage in Malaysia.

"If you put trees under 15 feet of water, you're going to have a huge issue with quality. The fresh fruit bunches (FFB) have been under water."

Heavy rains over the past weeks have forced close to a quarter of a million people to evacuate from their homes and claimed 21 lives as of Tuesday, local authorities said.

The benchmark March contract ended 0.8 percent lower at 2,267 ringgit ($649) per tonne by Wednesday's close. The contract climbed to 2,308 ringgit on Monday, its highest since Nov. 4.

Palm recorded a 14.8 percent drop this year, its biggest decline since 2012, but losses were less steep than initially expected as fears of flooding crimping supply helped a recovery  in prices that in September had plunged to five-year lows.

Traded volume stood at 27,497 lots of 25 tonnes each, below the usual 35,000 lots.       

The Malaysian Palm Oil Association forecast crude palm oil production in Malaysia fell 21 percent in the Dec. 1-20 period compared with a month earlier.

 A group of millers in southern peninsular Malaysia estimated crude palm oil production between Dec. 1-25 over the states of Johor, Pahang and Melaka plunged 37 percent from November, according to traders.

Palm oil may retrace further to 2,245 ringgit per tonne, as it has pierced below support at 2,283 ringgit, according to Reuters market analyst Wang Tao.

In other markets, oil fell towards $56 a barrel on Wednesday and was heading for its biggest annual decline since 2008, pressured by weakening demand and a supply glut prompted by the U.S. shale boom and OPEC's refusal to cut output.

In vegetable oil markets, the most active May soybean oil contract on the Dalian Commodity Exchange rose 0.2 percent in late Asian trade, while the U.S. soyoil contract for March fell 0.5 percent.

  Palm, soy and crude oil prices at 1049 GMT
                                                                                                            
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      JAN5    2305    -9.00    2295    2307     249
  MY PALM OIL      FEB5    2280   -18.00    2277    2301    1215
  MY PALM OIL      MAR5    2267   -18.00    2261    2288   13388
  CHINA PALM OLEIN MAY5    5078    +0.00    5052    5098  382500
  CHINA SOYOIL     MAY5    5744   +14.00    5702    5754  301902
  CBOT SOY OIL     MAR5   32.89    -1.60   32.88   33.14    3399
  INDIA PALM OIL   DEC4  460.70    -1.60  460.70  462.00     389
  INDIA SOYOIL     JAN5  645.00    -5.90  644.60  652.80   26305
  NYMEX CRUDE      FEB5   53.23    -0.89   53.16   53.92   16537
                                                                                                            
  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
  India soy oil in Indian rupee per 10 kg
  Crude in U.S. dollars per barrel
 
($1 = 3.4950 ringgit)
($1 = 6.2040 Chinese yuan)
($1 = 63.12 Indian rupee)