* Heavy rains seen next week in Johor, Pahang states-weather office * Market looking out for more decisive euro zone action * Reuters polls show Malaysian palm stocks down, U.S. soy stocks up (updates prices) By Niluksi Koswanage KUALA LUMPUR, Dec 8 (Reuters) - Malaysian palm oil futures dropped on Thursday as investor doubts grew over European leaders coming to an agreement to tackle a debt crisis in a make-or-break summit this week. Prices of the vegetable oil have fallen 18 percent so far this year as the two-year euro zone debt crisis continues to deepen although losses have been limited with crude oil above $100 and heavy rains hitting production. Palm oil markets have largely priced in a second month of declining stocks in No. 2 producer Malaysia for November after a Reuters survey showed production probably fell at a faster pace than exports, traders said. "It's the do-or-die summit that is keeping palm oil markets subdued," said a trader with a foreign commodities brkerage. "Traders are also on the look out for Dec. 1-10 palm oil exports over the weekend from cargo surveyors that may show declines." Benchmark February palm oil futures on the Bursa Malaysia Derivatives Exchange settled 1 percent lower to trade at 3,089 ringgit ($990) per tonne. Overall traded volumes stood at 12,861 lots of 25 tonnes each, much lower than the usual 25,000 lots as more investors were unwilling to commit funds or take positions. The Malaysian weather office said moderately heavy rains are starting in the key oil palm growing states of Johor and Pahang from next week and could cause floods in low-lying areas. Both states account for 30-40 percent of national output. Excessive rains, however, can affect oil yield quality and force palm oil firms to sell the edible oil at a discount. So far, however, planters have not reported major logistical disruptions. Concerns of heavy rains have kept palm oil prices above 3,100 ringgit level just as prospects for a bumper South American soy crop have weighed on competing soyoil, narrowing the spreads and possibly shifting demand away from palm oil. According to Reuters data, refined, bleached and deodorised palm olein's POL-MYRBD-P1 discount to Argentine soyoil SOIL-AR-P1 has narrowed to $42 per tonne from $192 per tonne in mid-October. Brent crude rose above $110 on Thursday, as the market shrugged off data showing a gain in U.S. crude stockpiles and looked forward to further measures by the European Central Bank (ECB) to support growth. U.S. soyoil for January delivery fell nearly 1 percent in Asian trade in tandem with declines in soybeans and expectations the USDA will raise its soy stocks forecast. China's most active September 2012 soybean oil contract <0#DBY:> dropped 0.7 percent. Palm, soy and crude oil prices at 1010 GMT Contract Month Last Change Low High Volume MY PALM OIL DEC1 3070 -11.00 3069 3080 56 MY PALM OIL JAN2 3083 -29.00 3083 3109 752 MY PALM OIL FEB2 3089 -30.00 3083 3116 7989 CHINA PALM OLEIN MAY2 7980 -16.00 7916 8010 127884 CHINA SOYOIL MAY2 8782 -54.00 8726 8840 284660 CBOT SOY OIL JAN2 50.20 -0.28 49.89 50.47 6302 NYMEX CRUDE JAN2 100.98 +0.49 100.26 101.09 12517 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

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