10/11/2011 (Reuters) - Malaysian palm oil futures slipped off seven-week highs on Wednesday ahead of a key industry report that is expected to show stocks rising to a 22-month high last month.

Losses were limited on an expected cut in yield estimates for the U.S. soy crop crushed into competing edible oils and also after Italian Prime Minister Silvio Berlusconi said he would resign, raising hopes his debt-laden country would push through with economic reforms. 

Investors are watching weather conditions in Southeast Asia on concerns La Nina rains may further disrupt oil palm harvesting during the end-year monsoon season -- a scenario that could reverse a 20 percent decline in prices this year. 

"Before the rise in palm oil price really happens, there is going to be a decline on the high stocks. But moving forward, we are going into a weather market," said a trader with a foreign commodities brokerage in Kuala Lumpur.

"The euro zone problems are going to be there regardless of the Italian prime minister saying he will resign."

The benchmark January palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange settled 0.4 percent lower to 3,034 ringgit ($970.10) after rising as high as 3,068 ringgit -- a level unseen since Sept. 21.

Traded volumes stood at 23,485 lots of 25 tonnes each, compared to the usual 25,000 lots on investor caution over the euro zone debt jitters.

Technical outlook turned negative, with Reuters analyst Wang Tao saying Malaysian palm oil FCPOc3 will fall to 2,960 ringgit per tonne as it has completed a wave "e" or wave "a" rise.  

Some investors are cutting back positions ahead of the industry regulator Malaysian Palm Oil Board reporting October data on Thursday which is expected to show output staying higher than exports, pushing stocks to above 2.2 million tonnes, a 22-month high.  

Other investors are looking at the U.S. Department of Agriculture's global supply and demand data due later in the day which will show a small decline in soy yields just as concerns of heavy rains delay the U.S. soy harvest. 

Brent crude fell on Wednesday, pressured by European debt concerns which outweighed a boost from cooling Chinese inflation data which had soothed fears of a sharp slowdown in the world's second largest oil consumer.

Lower crude oil pressured prices of other vegetable oils that are used in competing biodiesel. U.S. soyoil for December delivery dropped 0.9 percent ahead of the U.S. agriculture data report.

China's most active May 2012 soybean oil contract trimmed earlier gains to end up 0.1 percent. 
     
  Palm, soy and crude oil prices at 1012 GMT
                                                                
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      NOV1    3065   +13.00    3065    3065       5
  MY PALM OIL      DEC1    3044    -6.00    3034    3068    2193
  MY PALM OIL      JAN2    3034   -11.00    3027    3068   11907
  CHINA PALM OLEIN MAY2    8044   +92.00    8006    8110  161360
  CHINA SOYOIL     MAY2    9170   +12.00    9158    9242  304876
  CBOT SOY OIL     DEC1   51.37    -0.48   51.37   51.98    6804
  NYMEX CRUDE      DEC1   95.77    -1.03   95.52   97.32   20258
                                                                
  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 = 3.127 Ringgit)