CORRECTED-VEGOILS-Surging stocks, soy drag palm oil to lowest in nearly 3 yrs

(Corrects first paragraph milestone to nearly three years, not
more than three years)
* Prices lowest since Nov 2009
* Futures down 29 percent so far since start of 2012
* Palm oil to rebound to 2,500 ringgit -technicals
* Traders concerned over lacklustre exports in Malaysia

By Niluksi Koswanage
KUALA LUMPUR, Oct 2 (Reuters) - Malaysian palm oil futures
dived to their lowest in nearly three years on Tuesday, as
slowing demand from Asia coincided with a drop in the edible
oil's appeal as a substitute for soy oil, with the U.S. soybean
harvest progressing at a record pace.
Palm oil's decline follows the weakness in the Chicago
soybean complex, which tumbled to a three-month low during Asian
hours on Tuesday on U.S. harvest pressure. Palm oil has lost
more than 29 percent since the start of the year.
Lacklustre palm oil shipments, despite the Malaysian
government increasing a tax free export quota for crude palm
oil, is now certain to boost stocks in September above the
ten-month high logged in August.
"There is nothing to do but sell. Everything is working
against palm oil, from fundamentals to other global markets,"
said a trader with a foreign commodities brokerage in Malaysia.
"I suspect there may be a bounce tomorrow but everyone is
short-selling for now and the general trend is for the market to
go lower in the weeks to come."
The benchmark December contract on the Bursa
Malaysia Derivatives Exchange dropped 8.7 percent - its steepest
daily drop since the 2008 financial crisis - to 2,250 ringgit
($737) per tonne, a level unseen since November 2009.
It later closed at 2,255 ringgit per tonne.
Total traded volumes jumped to 49,867 lots of 25 tonnes
each, nearly double the usual 25,000 lots as dealers
aggressively sold off the market.
Reuters market analyst Wang Tao said technicals showed palm
oil would rebound to 2,500 ringgit per tonne, as its fall may
temporarily stop around a support at 2,407 ringgit, but that
rebound would little affect the current downtrend.

Palm oil exports in September hovered around 1.4 million
tonnes, barely moving from a month ago. Malaysian plantation
officials and traders now say stocks could easily hit 2.5
million tonnes, with October shaping up to be a peak production
month.
"The government has issued about 3.5 million tonnes of tax
free crude palm oil export quota for this year and it was
supposed to finish in September," said another Malaysian trader.
"If it has really been completed, we are in trouble. Stocks
are going to shoot up," he added.
Brent crude oil slipped to around $112 a barrel on Tuesday
as investors weighed a weaker outlook for fuel demand and
sluggish economic growth against the risk of possible supply
disruptions.
In other vegetable oils markets, U.S. soyoil for December
delivery dropped 1.4 percent in Asian trade. The Dalian
Commodity Exchange remains closed for a holiday in China and
will resume trading on October 8.

Palm, soy and crude oil prices at 1024 GMT

Contract Month Last Change Low High Volume
MY PALM OIL OCT2 2150 -150.00 2140 2250 224
MY PALM OIL NOV2 2175 -217.00 2175 2345 2012
MY PALM OIL DEC2 2255 -209.00 2250 2430 28743
CHINA PALM OLEIN JAN3 7186 +10.00 7172 7244 220106
CHINA SOYOIL JAN3 9278 +6.00 9250 9328 305268
CBOT SOY OIL DEC2 50.45 -0.74 50.41 51.35 10416
NYMEX CRUDE NOV2 92.72 +0.23 92.04 92.89 16140

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

(Editing by Miral Fahmy)