31/05/2011 (Business Recorder) - Malaysian palm oil futures ended lower on Monday after hitting more than two-month highs as traders sold following a three-day rally and looked to exports data to set direction.

"The market was overbought," said a trader with foreign brokerage in Kuala Lumpur.

"In the short term, the market is strong and will trade between 3,470 to 3,500 ringgit."

The benchmark August crude palm oil contract fell 0.9 percent to 3,408 ringgit ($1,125.681) after hitting a high of 3,464.

The overall traded volume was 16,739 lots of 25 tonnes each, lower than the usual 25,000 lots.

Traders are expecting May exports data due on Tuesday to set the market trend after cargo surveyors showed upbeat overseas demand earlier.

"We're looking at 1.45 million tonnes at least," another trader in Kuala Lumpur estimated.

Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance reported April's palm oil exports at 1.26 and 1.32 million tonnes respectively.

Output by the world's No. 2 palm oil producer has picked up with strong demand by the world's two major importers underpinning prices, traders said.

"Although there is momentum for the market to climb higher, the export data is not going to help much unless we see a draw down in stocks," said another trader in Kuala Lumpur, who estimated May's export data would come in at 1.35 million tonnes.

"Production could rise 12-13 percent to 1.7-1.75 million tonnes this month."

Malaysian palm oil yields are recovering after two years of erratic weather reduced productivity. In April, total output stood at 1.53 million tonnes.

A Reuters analysis showed Malaysian palm oil futures would retrace to 3,350 ringgit per tonne as it has failed a resistance zone of 3,435 to 3,461 ringgit.

The most active January 2012 soyoil contract on China's Dalian Commodity Exchange rose half a percent in Asian hours, as drought-triggered supply worries lift prices.

"Drought in southern China has driven food prices higher, pressuring market sentiment, although it will not impact soyoil directly," said Zhang Juan Cong, an oil analyst with Dadi Futures in China's southern city of Hangzhou.

US soyoil was closed on Monday for the Memorial Day holiday.