* Palm oil prices hit 2,804 ringgit, lowest since Oct 2011 * Palm oil exports for Sept. 1-20 up 14.6 percent-ITS * Exports up 12.8 percent for same period -SGS * Rising inventory levels weigh on market - traders (Updates throughout) By Chew Yee Kiat SINGAPORE, Sept 20 (Reuters) - Malaysian palm oil futures dropped to their lowest this year on Thursday amid rising inventory levels, while data showing a continued contraction in manufacturing in China -- the world's second biggest edible oils buyer -- also weighed on prices. Futures tumbled to 2,804 ringgit per tonne, the lowest since October 2011, as global oilseed supplies were expected to pick up on expectations for crop yields across a drought-stricken U.S. Midwest to exceed forecasts. Also weighing on prices was data that showed manufacturing in China contracted for the 11th month in a row in September, indicating the world's second largest economy remains on track for a seventh quarter of slowing growth. "There is excess palm oil at ports, storage tanks are full and production is doing well, so prices are under pressure," said a Singapore-based trader with a global commodities house. "On top of that, the overall external market is also weak." At closing, the benchmark December contract on the Bursa Malaysia Derivatives Exchange had lost 1.4 percent to 2,820 ringgit ($918) per tonne. Total traded volume stood at 41,875 lots of 25 tonnes each, much higher than the usual 25,000 tonnes. Exports remained strong according to latest cargo surveyor data, but traders said rising inventory levels that could surpass 2.2 million tonnes in September -- which would be the highest level for this year -- was weighing on the market. "Compared to last month, exports should be better. But the major thing is stocks have to go down for the market to move higher," said a trader with a foreign commodities brokerage in Malaysia. Cargo surveyor Intertek Testing said export shipments rose almost 15 percent during Sept. 1-20 over the same period a month ago, while another cargo surveyor, Societe Generale de Surveillance, reported an almost 13 percent increase from a month ago. In a bearish sign for palm oil, Brent crude eased below $108 a barrel on Thursday after the China data weakened sentiment in a market that is already reeling from Saudi Arabia's pledge to keep global crude oil prices low. In other vegetable oil markets, U.S. soyoil for December delivery dropped 1.3 percent. The most active January 2013 soyoil contract on the Dalian Commodity Exchange closed 0.3 percent lower. Palm, soy and crude oil prices at 1017 GMT Contract Month Last Change Low High Volume MY PALM OIL OCT2 2675 -30.00 2648 2700 533 MY PALM OIL NOV2 2775 -38.00 2747 2816 5959 MY PALM OIL DEC2 2820 -39.00 2804 2871 25650 CHINA PALM OLEIN JAN3 7760 -52.00 7744 7852 224170 CHINA SOYOIL JAN3 9850 -32.00 9828 9944 533330 CBOT SOY OIL DEC2 55.53 -0.72 55.42 56.58 11404 NYMEX CRUDE OCT2 91.05 -0.93 90.66 92.15 2074 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 ($1=3.071 ringgit)

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