* Palm oil market up 10.5 percent so far this year * Malaysia palm oil exports drop narrowing - cargo surveyor * S.America drought also a key driver for palm oil futures (Adds details, comment) By Niluksi Koswanage KUALA LUMPUR, April 23 (Reuters) - Malaysian palm oil inched higher on Monday on expectations that big food consumers will lift demand for the tropical oil in the wake of higher soyoil prices after droughts crimped South America's soy crop. Traders said palm oil could be headed higher as exports in the first 20 day of April pointed to recovery, a signal that top buyer India was focusing on palm oil to shore up cooking oil supplies. The palm oil market has gained 10.5 percent this year on strong food demand, an lower stocks in No.2 producer Malaysia and weaker global edible oil production after a drought hurt South American soy crops. "Palm oil has bottomed out since last week and is on the rise again," said a trader with a foreign commodities brokerage in Kuala Lumpur. "The market is getting a bit of support from the China PMI data that showed some recovery, but generally palm oil is getting its drive from South America." By midday, benchmark July palm oil futures on the Bursa Malaysia Derivatives Exchange were up 0.1 percent at 3,514 ringgit per tonne ($1,020). Traded volumes stood at 11,848 lots of 25 tonnes each, a tad lower than the usual 12,500 lots. Argentina cut its official estimate for this year's soy crop last Thursday, and many traders expect the U.S. Agriculture Department to slash its own estimates in its supply-and-demand report due early next month. Argentina's Agriculture Ministry has pegged the soy crop at 42.9 million tonnes, compared to the latest USDA estimate of 45 million tonnes. A reduced soy crop for crushing into soyoil will tip demand over to palm oil. As a result, Malaysian palm oil exports for April 1-20 fell 5.3 percent from a month earlier, a marked improvement from a 13.5 percent drop in the first 15 days of this month due in part to stronger demand from India. Brent crude oil held steady under $119 per barrel on Monday, as supply worries stemming from tightening Western sanctions on Iran and stabilising factory activity in China, the world's second-largest economy. In other vegetable oil markets, the most active U.S. soyoil contract for May slipped 0.1 percent in Asian trade, despite higher soybean prices, as some traders booked profit. The most active Dalian soyoil September contract climbed 1 percent, lifted by strong Chinese demand for soybeans as supply concerns in South America worsen. Palm, soy and crude oil prices at 0440 GMT Contract Month Last Change Low High Volume MY PALM OIL MAY2 3520 +5.00 3510 3521 804 MY PALM OIL JUN2 3514 +4.00 3505 3530 1162 MY PALM OIL JUL2 3505 +5.00 3498 3522 5792 CHINA PALM OLEIN SEP2 8900 +80.00 8890 8928 89398 CHINA SOYOIL SEP2 9976 +102.00 9958 10010 307950 CBOT SOY OIL JUL2 56.17 -0.11 56.09 56.36 7651 NYMEX CRUDE JUN2 103.82 -0.06 103.70 103.90 3266 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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