29/08/2012 (Reuters) - Malaysian crude palm oil futures slid on Tuesday as investors took profit after the market hit a six-week high the previous session, with traders watching for a big stocks build-up to weigh on prices.

Palm oil, which has lost more than 4 percent this year, is moving in tandem with the U.S. soy complex, where investors have unwound bullspreads after the market recently hit a record as the worst drought in 56 years ravaged crops.

A smaller supply of soybeans to be crushed into edible oil  and strong palm oil production in coming months has widened palm's discount to soyoil to more than $250 per tonne.

But palm oil stocks in Malaysia, the world's second-largest producer, are set to rise to more than 2.3 million tonnes, traders said, as production outpaces export growth in the second half of the year.

"I sold off this morning. Palm oil is surviving on borrowed strength of soyoil markets," said a trader with a foreign commodities brokerage. 

The benchmark November 2012 contract on the Bursa Malaysia Derivatives Exchange dropped 2.1 percent to 3,029 ringgit ($970). The previous day, the contract hit 3,122 ringgit, a level last seen on July 17.

Total traded volume stood at 22,029 lots of 25 tonnes each, slightly lower than the usual 25,000 lots.

Palm oil is expected to drop to 3,007 ringgit per tonne as a five-wave cycle has completed on the rise from 2,820 ringgit to 3,122 ringgit, said Reuters analyst Wang Tao.

Demand appears to be picking up, with Malaysia's exports rising as much a 6.6 percent in Aug. 1-25 from the same period a month earlier, driven by strong shipments of tax free crude grades and demand from India and China, cargo surveyor data showed.

"Demand looks all right but we will see stocks go up to 2.3 million tonnes or even more for that matter in August because of production," said another trader with a foreign commodities brokerage.

Other vegetable oil markets dropped on profit-taking after the soy complex hit a record on Monday, although losses were limited by firmer crude oil that was steady above $112 per barrel.

The most active U.S. soyoil contract for December delivery dropped 0.2 and the most active January 2013 soyoil contract on the Dalian Commodity Exchange dropped 1.3 percent.

  Palm, soy and crude oil prices at 1003 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      SEP2    2974   -58.00    2974    3013     389
  MY PALM OIL      OCT2    3000   -68.00    3000    3055    3116
  MY PALM OIL      NOV2    3029   -62.00    3024    3078   15782
  CHINA PALM OLEIN JAN3    8174  -112.00    8164    8260  241806
  CHINA SOYOIL     JAN3    9980  -136.00    9976   10072  411696
  CBOT SOY OIL     DEC2   56.46    -0.10   56.25   56.88    6680
  NYMEX CRUDE      OCT2   96.10    +0.63   95.14   96.34   22714

  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 = 3.1095 ringgit)