24/04/2012 (Reuters) - Malaysian palm oil fell on Monday after a slew of European indicators signalled a faster rate of economic contraction and limited hopes for a strong recovery in growth. 

Losses, however, were limited by expectations that big food consumers will lift demand for the tropical oil in the wake of higher soyoil prices after droughts crimped South America's soy crop. 

The palm oil market has gained more than 9 percent this year on strong food demand, lower stocks in No.2 producer Malaysia and weaker global edible oil production after a drought hurt South American soy crops. 

"The purchasing managers' indexes for the euro zone were rather dismal and that triggered a knee-jerk reaction in financial markets. Palm oil was not spared because some dealers wanted to book some profits," said a trader with a foreign commodities brokerage. 

Benchmark July palm oil futures on the Bursa Malaysia Derivatives Exchange dropped 0.7 percent to close at 3,475 ringgit ($1,133) per tonne. 

Traded volumes stood at 26,086 lots of 25 tonnes each, a tad higher than the usual 25,000 lots. 

Although weaker Purchasing Manager Indexes for Germany, France and the euro zone has dampened hopes for a strong global economic recovery, some traders were focusing on tighter edible oil supplies that may be inadequate to sate food demand. 

Argentina cut its official estimate for this year's soy crop last Thursday, and many traders expect the U.S. Agriculture Department to slash its own estimates in its supply-and-demand report due early next month.   

Argentina's Agriculture Ministry has pegged the soy crop at 42.9 million tonnes, compared to the latest USDA estimate of 45 million tonnes. A reduced soy crop for crushing into soyoil will tip demand over to palm oil.   

As a result, Malaysian palm oil exports for April 1-20 fell 5.3 percent from a month earlier, a marked improvement from a 13.5 percent drop in the first 15 days of this month due in part to stronger demand from India.  

Oil fell below $118 a barrel on Monday, pressured by lingering concern over the euro zone debt crisis although supply worries from tightening Western sanctions on Iran checked the slide.  

In other vegetable oil markets, the most active U.S. soyoil contract for May slipped 0.4 percent in late Asian trade, despite higher soybean prices, as some traders booked profit. 

The most active Dalian soyoil September contract  climbed 0.9 percent, lifted by strong Chinese demand for soybeans as supply concerns in South America worsen.     

  Palm, soy and crude oil prices at 1009 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      MAY2    3498   -17.00    3485    3521    1491
  MY PALM OIL      JUN2    3493   -17.00    3482    3530    3223
  MY PALM OIL      JUL2    3475   -25.00    3472    3522   14797
  CHINA PALM OLEIN SEP2    8878   +58.00    8874    8928  127652
  CHINA SOYOIL     SEP2    9960   +86.00    9952   10010  409210
  CBOT SOY OIL     JUL2   56.03    -0.25   55.90   56.36   11855
  NYMEX CRUDE      JUN2  103.08    -0.80  102.98  103.90   15246

  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