10/04/2014 (Reuters) - Malaysian palm oil futures ended higher on Wednesday, recouping losses from two-month lows to follow gains in competing soy markets overseas, but a strong ringgit and worries of a surge in output capped the advance.

The Chicago Board of Trade (CBOT) soyoil prices had closed up 1.6 percent on Tuesday as investors anticipated tighter soybean stocks. This lent strength to prices of palm oil, a common food and fuel substitute.

"Yesterday palm fell because of the very high production estimates which nobody had expected, and also due to currency play," said a trader with a foreign commodities brokerage in Malaysia.

"But the CBOT closed higher, so there's some borrowed strength from there."

The benchmark June contract on the Bursa Malaysia Derivatives Exchange had inched up 1.5 percent to 2,615 ringgit ($810) per tonne by Wednesday's close.

Prices had slipped to 2,573 ringgit on Tuesday, the lowest since Feb. 7, after a sharp gain in the Malaysian ringgit prompted a selldown in late trade.

A total of 33,914 lots of 25 tonnes were traded - below the average 35,000 lots - with Indonesian investors absent from the market.

Indonesia's financial markets are closed on Wednesday as a public holiday was declared to allow Indonesians to vote in parliamentary elections. Trade will resume on Thursday.

Technicals showed that a bearish target at 2,519 ringgit per tonne has been established for Malaysian palm oil as it has broken below support at 2,613 ringgit, said Reuters market analyst Wang Tao.

The Malaysian ringgit gained 0.46 percent against the U.S. dollar on Wednesday to trade at 3.226, curbing buying interest from overseas buyers and adding pressure to palm prices which have lost nearly 2 percent this week.

Benchmark prices are also weighed down by growers' estimates that crude palm oil output in Malaysia - the world's second-largest grower - surged 18 percent in March, topping market estimates for a 9 percent rise from February's 1.28 million tonnes.

Industry regulator the Malaysian Palm Oil Board (MPOB) will release official data for Malaysia's March production, exports and end-stocks on Thursday.

Investors also expect the U.S. Department of Agriculture to cut its forecast for U.S. soybean stocks to a 5-year low and to trim its Brazilian soybean harvest estimate.

Smaller supplies of the oilseed for crushing would boost soyoil prices tracked by palm. 

USDA will release its monthly supply and demand report, which will include updates on both the U.S. and global soybean supply situation, at 1600 GMT on Wednesday.

The U.S. soyoil contract for May rose 0.8 percent in late Asian trade, while the most active September soybean oil contract on the Dalian Commodities Exchange gained 0.2 percent.

In other markets, Brent futures steadied above $107 a barrel as tension escalated over Ukraine, but a steep rise in crude oil stockpiles in the United States weighed on prices.   

  Palm, soy and crude oil prices at 1016 GMT

  Contract        Month    Last   Change     Low    High  Volume
  MY PALM OIL      APR4    2647   +28.00    2630    2649      88
  MY PALM OIL      MAY4    2633   +40.00    2597    2640    2462
  MY PALM OIL      JUN4    2615   +39.00    2577    2624   19453
  CHINA PALM OLEIN SEP4    6176   -46.00    6156    6280  598674
  CHINA SOYOIL     SEP4    7038   +16.00    7022    7116  634930
  CBOT SOY OIL     MAY4   42.44    +0.33   41.84   42.46    7394
  NYMEX CRUDE      MAY4  102.47    -0.09  102.03  102.53   15029

  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 = 3.23 Malaysian ringgit)
 ($1 = 6.2005 Chinese yuan)