KUALA LUMPUR: Malaysian palm oil futures were headed for a third straight day of declines, hitting a two-week low in early trade, as the market was bearish on expectations of an increase in production.

Malaysia's palm oil output is on track to rebound this year after an El Nino-affected 2016, but will miss earlier forecasts that it could match 2015's record high, according to a Reuters poll of traders, planters and analysts.

The benchmark palm oil contract for October delivery on the Bursa Malaysia Derivatives Exchange fell 0.2 percent to 2,508 ringgit ($585.57) at the midday break. It earlier dipped to 2,494 ringgit, lowest since July 4.

Traded volumes stood at 15,026 lots of 25 tonnes each.

"People fear production, it is quite good and will remain so," said a trader from Kuala Lumpur.

"The big companies are reporting stronger production figures. Only this can pull the market down, coupled with the ringgit."

A stronger ringgit, palm oil's traded currency, strengthened against the dollar on Wednesday, making palm oil more expensive for holders of foreign currencies.

The ringgit was up 0.02 percent at 4.2830 per dollar by noon, after hitting its highest against the dollar in a month.

The trader added that weaker demand also weighed on palm prices.

"Buying also looks hollow now. Shipments for the first half of July were good due to the rollover exports from June, but the general feeling is that July exports will slow down."

Export data from cargo surveyors for the July 1-20 period is scheduled for release on Thursday.

In other related oils, the December soybean oil contract on the Chicago Board of Trade fell 0.2 percent, while the September soybean oil on the Dalian Commodity Exchange was down 0.5 percent.

The September palm olein contract declined 0.7 percent.

Palm oil is expected to test a support at 2,501 ringgit per tonne, as its correction from the July 11 high of 2,585 ringgit may extend further, said Wang Tao, a Reuters market analyst for commodities and energy technicals.