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VEGOILS-Palm slips on higher output, subdued demand concerns

KUALA LUMPUR, June 29 (Reuters) - Malaysian palm oil futures fell on Wednesday after a two-day rally, hit by expectations of rising production and weaker demand following a raise in export quotas for companies by top producer Indonesia. The benchmark palm oil contract FCPOc3 for September delivery on the Bursa Malaysia Derivatives Exchange fell 80 ringgit, or 1.6%, to 4,909 ringgit ($1,116.19) a tonne by the midday break. "Anticipation of stronger production in July, reports of millers shutting operations due to unfavorable market conditions, as well as skyrocketing freight prices are the main contributors to volatility in the palm market," said Paramalingam Supramaniam, director at Selangor-based brokerage Pelindung Bestari. The market is keeping watch on exports, which may continue to weaken due to lack of demand, surging freight costs and difficulty in getting vessels, he added. Demand for Malaysian palm oil has been disrupted by larger rival Indonesia's return to the export market after a recent halt in shipments. Indonesian palm oil companies will be offered larger export quotas under new plans to adjust rules on local cooking oil sales, officials said late Tuesday, as part of government efforts to improve domestic distribution after a months-long price crisis. Dalian's most-active soyoil contract DBYcv1 fell 0.6%, while its palm oil contract DCPcv1 eased 0.5%. Soyoil prices on the Chicago Board of Trade BOcv1 were down 1.2%. Palm oil is affected by price movements in related oils, as they compete for a share in the global vegetable oils market. Palm oil may test a support at 4,742 ringgit per tonne, as it could have completed a bounce from the recent low of 4,493 ringgit, Reuters technical analyst Wang Tao said. TECH/C ($1 = 4.3980 ringgit) (Reporting by Mei Mei Chu; Editing by Rashmi Aich) ((Meifong.chu@thomsonreuters.com)) The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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