28/12/2011 (Reuters) - Malaysian crude palm oil futures dropped on Tuesday as slowing exports hurt sentiment, while a 6 percent rally last week gave traders an excuse to book profits as well.

Palm oil has lost more than 16 percent so far this year and is set to post its first annual decline since 2008 as the euro zone debt crisis continues to fester and raise fears of slowing global economic growth.    

"The market was overbought last week and now we have slowing exports and an unresolved euro zone debt crisis to consider," said a trader with a foreign commodities brokerage in the Malaysian capital. 

Benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange settled down 0.4 percent at 3,159 ringgit ($1,000) per tonne.

The contract last week touched a high of 3,178 ringgit, a level unseen since Nov. 23.

Traded volumes for palm oil futures were thin after a long Christmas weekend and ahead of the new year holidays with 12,712 lots of 25 tonnes each, compared to the usual 25,000 lots.  

Dealers were also eyeing weather developments in Malaysia, the No.2 producer of the vegetable oil where regularly issued data may show signs of heavy rains affecting harvesting and production. 

The Malaysian Meteorological Department warned ongoing intermittent and heavy rains could trigger floods in low-lying areas in the key oil palm growing states of Pahang, Johor, Sabah and Sarawak, accounting for almost 75 percent of national palm oil output.

But local media quoted the country's National Security Council Director as saying the impact of the heavy rains and floods was still manageable and not severe like early this year.

Planters reported minimal disruption in deliveries of crude palm oil to refineries and ports.

"We have heard of some floods but it's not impacting our plantations. Any delay at this point is still manageable," said an official with a plantation house in Malaysia with holdings in Johor and Sabah states.

Palm oil production in Malaysia is also in the seasonally low yield phase and traders expect stock levels to come down although the pace of the decline depends on the export trend.

Exports have moderated after exceptionally strong growth in July and August, potentially easing any tightness in stocks.

Cargo surveyor Intertek Testing Services reported over the weekend that Malaysian exports fell 11.6 percent to 1.18 million tonnes in Dec. 1-25 compared to the same period a month ago as China and India wind up shipments for this year.

Another surveyor, Societe Generale de Surveillance, reported a 11.9 percent drop.

Brent crude rose slightly to trade above $108 on Tuesday, supported by supply disruptions in Syria and Iranian naval exercises in a key shipping lane, while improved U.S. home sales data and year-end short-covering also supported prices. 

U.S. soyoil markets were shut in electronic trade. The most active Sept 2012 soyoil contract on China's Dalian commodity exchange dropped 0.7 percent.        
 
  Palm, soy and crude oil prices at 1006 GMT
                                                                  
  Contract                           Month    Last   Change     Low    High  Volume
  MY PALM OIL                   JAN2    3163    -7.00    3142    3168     166
  MY PALM OIL                  FEB2    3162   -13.00    3144    3179    1127
  MY PALM OIL                  MAR2    3159   -11.00    3139    3176    6276
  CHINA PALM OLEIN      MAY2    7882   -56.00    7872    7928   52766
  CHINA SOYOIL              SEP2     8874   -62.00    8852    8926  237318
  CBOT SOY OIL              MAR2     51.37    +0.00    0.00    0.00       0
  NYMEX CRUDE            FEB2      99.69    +0.01   99.37  100.13    3370
                                                                 
  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 = 3.1575 ringgit)