U.S. Markets closed

VEGOILS-Palm hits 1-1/2 month low on higher output worries

(Updates prices)

* Prices dip to 2,265 ringgit, lowest since Aug. 12

* October monsoon could lift yields -trader

* Malaysia's Sept. 1-25 palm oil exports up 6.4-6.5 pct

-cargo surveyors

By Anuradha Raghu

KUALA LUMPUR, Sept 26 (Reuters) - Malaysian palm oil futures

fell for a third straight day on Thursday, dipping to their

lowest in more than a month, as concern over surging Southeast

Asian supply of the tropical oil kept investors on edge.

Traders and analysts widely expect output in top producers

Malaysia and Indonesia to pick up from September, as the peak

palm oil production season kicks off, adding pressure to prices

that have lost almost 7 percent this year.

Some market players say Malaysia's palm oil output could hit

a record this year. The No.2 producer has churned out about

630,000 tonnes more crude palm oil in the period from January to

August over the corresponding 2012 period, data from industry

regulator the Malaysian Palm Oil Board shows.

"Many people are now reporting double-digit growth in

production for September. That could be one cause why the market

is drifting lower," a trader with a foreign commodities

brokerage said.

The monsoon season, which brings rain to the oil

palm-growing parts of Malaysia, could also further lift yields,

the Kuala Lumpur-based trader said.

"This time round the high cycle is a little delayed -- if

the monsoon comes in October, it will encourage flowering, and

production could see a sudden big pick-up."

The benchmark December contract on the Bursa

Malaysia Derivatives Exchange had dipped to 2,265 ringgit ($704)

per tonne, the lowest since Aug. 12, before pulling up slightly

to end at 2,268 ringgit by Thursday's close, marking a loss of

1.1 percent.

Total traded volumes stood at 24,809 lots of 25 tonnes each,

lower than the average 35,000 lots.

Exports of Malaysian palm oil products rose between 6.4

percent and 6.5 percent in the Sept. 1-25 period from a month

ago, according to cargo surveyor data, as shipments to India and

Europe picked up and helped offset weaker Chinese demand.

In other markets, oil prices gained slightly despite easing

geopolitical worries and an improving supply picture, as traders

sought bargains after sharp losses earlier this month.

In vegetable oil markets, the U.S. soyoil contract for

December eased 0.4 percent in late Asian trade. The

most-active January soybean oil contract on the Dalian

Commodities Exchange also fell 0.4 percent.

Palm, soy and crude oil prices at 1005 GMT

Contract Month Last Change Low High Volume

MY PALM OIL OCT3 2311 -13.00 2300 2327 660

MY PALM OIL NOV3 2272 -27.00 2269 2296 2278

MY PALM OIL DEC3 2268 -26.00 2265 2291 12922

CHINA PALM OLEIN JAN4 5404 -6.00 5364 5426 214026

CHINA SOYOIL JAN4 7042 -26.00 7012 7074 407256

CBOT SOY OIL DEC3 41.94 -0.15 41.88 42.09 3371

NYMEX CRUDE NOV3 102.74 +0.08 102.20 102.87 15586

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=3.218 Malaysian ringgit)

(Editing by Clarence Fernandez and Himani Sarkar)