Chicago soy fell to the lowest in more than four months after the USDA on Friday forecast soybean production at 2.971 billion bushels, up from its October estimate of 2.86 billion and above the 2.892 billion touted by analysts.
The most active May 2013 soybean oil contract on the Dalian Commodity Exchange was trading 3.6 percent lower by the midday break, after earlier hitting its 4-percent daily limit.
US soyoil for December delivery was down 1.8 percent in early Asian trade.
"We believe the USDA data is negative to crude palm oil (CPO) prices as higher soybean oil supply will curb demand for CPO. Note that CPO is commonly used as substitute for soybean oil for food and industry usage," Alan Lim Seong Chun, an analyst with Malaysia's Kenanga Investment Bank, said in a research note.
"Historically, the correlation between CPO and soybean oil prices is almost perfect at 98 percent."
By the midday break, the benchmark January contract on the Bursa Malaysia Derivatives Exchange had lost 3.2 percent to 2,242 ringgit ($733) per tonne. Prices had earlier fallen to 2,220 ringgit, the lowest since Nov. 9, 2009.
Total traded volumes stood at 21,302 lots of 25 tonnes each, much higher than the usual 12,500 lots despite expectations for a quiet market ahead of the Diwali and Awal Muharram holidays in Malaysia this week.
Palm oil may hover around support at 2,230 ringgit per tonne for one or half a trading session before falling again towards 2,134 ringgit, said Reuters market analyst Wang Tao.
Malaysia's October palm oil stocks inched up 1.1 percent to a record 2,508,644 tonnes from a revised 2,480,990 tonnes in September, industry regulator the Malaysian Palm Oil Board said after the midday break on Monday.
The rise missed market expectations that stocks in the world's No.2 palm oil producer likely climbed 7.5 percent to 2.67 million tonnes.
Market players will be looking out for Malaysia's Nov. 1-10 exports data from Societe Generale de Surveillance later, after another cargo surveyor Intertek Testing Services reported on Saturday a 16 percent rise from the previous month.
In a bearish sign for palm oil, Brent oil slipped below $109 a barrel on Monday due to demand growth concerns as President Barack Obama struggles to reach a deal to avert a looming US fiscal calamity, overshadowing upbeat data from key consumer China.