28/03/2012 (Reuters) - Malaysian palm oil futures hit a new one-year high on Tuesday as traders bet on strong export growth after droughts had damaged the South American soy harvest that is crushed into competing soyoil.

Worries about soybean crop damage in Brazil can potentially boos demand for palm oil and has upped the stakes in the unfolding U.S acreage battle between soy and corn with a key U.S. government report due to be released on Friday.

Comments by leading analyst Dorab Mistry at a conference in China that palm oil will rise to 4,000 ringgit by end-June also pushed prices higher.

But traders said the upswing in prices could set the stage for a correction in the coming days.

"I see this at the last spike before correction again. Look at the (thin) volume, it's short-cover volume. Upside will stay at 3,500 ringgit," said a dealer with a foreign commodities brokerage in Malaysia.

By 0726 GMT, benchmark June palm oil futures on the Bursa Malaysia Derivatives Exchange inched up 0.9 percent at 3,493 ringgit ($1,142) per tonne, a level unseen since last March.  

Traded volumes stood at over 11,000 lots of 25 tonnes each, lighter than the usual 15,000 to 25,000 lots that get traded in the afternoon session.

Palm oil faces a resistance zone of 3,487-3,504 ringgit per tonne, said Reuters market analyst Wang Tao based on technical analysis, adding that a break above will trigger a significant rise to 3,806 ringgit in the next three months.

The edible oil futures started the week strongly, touching a one-year high level at 3,479 ringgit on Monday, as the latest Malaysian export data pointed to healthy demand outlook.

Exports rose 7.7 percent and 6.6 percent for the first 25 days of March from a month ago, said cargo surveyors Intertek Testing Services and Societe Generale de Surveillance  respectively.

Market players are focusing on Malaysia's palm oil supply, as a lower crude palm oil production could push prices up further.

"Crude palm oil production growth is poised to decline by 1.5 percent year-on-year to 1.4 million tonnes in March and this trend may continue throughout second quarter of 2012," said Alan Lim, an analyst at Kenanga Investment Bank, in a research note.

"After 12 months of a strong production up-cycle, we think the effect of biological stress will kick in very soon," he added.

Brent held steady above $125 on Tuesday as comments from the U.S. Federal Reserve indicating easy monetary policy would remain in place for some time raised investors' appetite for riskier assets.

In other vegetable oil markets, the most active U.S. soyoil contract for May delivery lost 0.1 percent in Asian trade while the most active September 2012 soyoil contract o China's Dalian Commodity exchange inched up 0.1 percent.

  Palm, soy and crude oil prices at 0731 GMT
                                                                       
  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      APR2    3506   +24.00    3474    3510     237
  MY PALM OIL      MAY2    3492   +37.00    3458    3495     857
  MY PALM OIL      JUN2    3489   +30.00    3450    3493    6840
  CHINA PALM OLEIN SEP2    8742    +2.00    8708    8770  161820
  CHINA SOYOIL     SEP2    9728    +8.00    9708    9754  334666
  CBOT SOY OIL     MAY2   55.40    -0.04   55.21   55.45    3351
  NYMEX CRUDE      MAY2  106.81    -0.22  106.67  107.17    6131
                                                                       
  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=3.0645 ringgit)