VEGOILS-Palm oil drops to one-month low on Spain fears

* Euro zone concerns heightened as Spain may be unable to
avoid bailout
* Prices touch low of 2,969 ringgit, lowest since June 22
* Weak exports, higher output contribute to weak sentiment

(Updates prices, milestones)
By Chew Yee Kiat
SINGAPORE, July 23 (Reuters) - Malaysian crude palm oil
futures dropped to the lowest in more than a month on Monday,
tracking broader financial market weakness on fresh concern over
Spain's ability to avoid a costly bailout that could worsen the
euro zone debt crisis.
Risky financial assets including crude oil and grains
futures suffered declines as investors liquidated their
positions on concern that the debt crisis could stall global
growth and damp fuel and food demand.
Half a dozen local governments were ready to follow in the
footsteps of Valencia, which on Friday said it would need help
from Madrid, Spanish local media reported.
Relentless heat in the U.S. grain belt continued to destroy
soybean crops and tighten soybean oil supply, but analysts said
investors took cues from macroeconomic factors instead.
"It's been two weeks that we've been talking about the U.S.
weather, so the weather risk has already been factored in unless
we hear something new coming from El Nino," said Ker Chung Yang,
commodities analyst with Phillip Futures in Singapore.
"There's news about Valencia seeking a bailout that has
pushed Spanish bond yields to new high and that could weigh on
the market."
The benchmark October palm oil futures on the Bursa
Malaysia Derivatives Exchange lost 1.7 percent to close at 2,990
ringgit ($943) per tonne. Prices earlier touched a low at 2,969
ringgit, the lowest since June 22.
Traded volume stood at 27,369 lots of 25 tonnes each, higher
than the usual 25,000 lots.
Traders said the weak sentiment was due in part to slow
exports and higher production in No.2 producer Malaysia, which
could boost palm oil stocks after they fell to a 14-month low in
June.
Malaysia's palm oil exports fell 23 percent over the July
1-20 period from a month earlier, said cargo surveyors Intertek
Testing Services and Societe Generale de Surveillance.

Exports to China slowed by more than half for the period on
high stockpiles and a slowdown in demand after China's economy
showed signs of slowing, said a Singapore-based trader.
But the market is also watching for signs of El Nino
returning to Southeast Asia as the hot and dry weather could
hurt palm oil output for top producers Indonesia and Malaysia.

In other markets, crude oil prices slipped towards $103 per
barrel on Monday as investors sold off riskier assets and fled
for the perceived safety of the dollar on fears that Spain will
be unable to avoid a costly sovereign bailout.
Concern over the euro zone debt crisis also weighed on other
vegetable oil markets.
By 1005 GMT, the most active U.S. soyoil for December
delivery was down 1.7 percent and the most active January 2013
soyoil contract on the Dalian Commodity Exchange had
lost 2.2 percent.

Palm, soy and crude oil prices at 1006 GMT

Contract Month Last Change Low High Volume
MY PALM OIL AUG2 2962 -48.00 2950 2980 375
MY PALM OIL SEP2 2976 -49.00 2956 3009 3664
MY PALM OIL OCT2 2990 -52.00 2969 3008 17100
CHINA PALM OLEIN JAN3 7882 -192.00 7876 8000 260188
CHINA SOYOIL JAN3 9630 -212.00 9626 9766 420580
CBOT SOY OIL DEC2 54.22 -0.96 54.17 55.29 10050

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

($1=3.17 Malaysian ringgit)

(Editing by Niluksi Koswanage and Chris Lewis)