MANILA, March 7 (Reuters) - The Philippine army has ordered troops to pull out from a southern farming village where 19 Muslim rebels and soldiers were killed in fierce fighting earlier this week, a military commander said on Wednesday.

Brigadier-General Edgardo Gurrea said about 100 soldiers in Midsayap town were ordered late on Tuesday to re-position away from the conflict area to allow thousands of civilians to return to their homes and farms.

"There has been an order from higher headquarters for troops to disengage and prevent future clashes that may affect the peace talks with the Muslim rebels," Gurrea told Reuters, adding a team of Malaysian monitors was sent to oversee the ceasefire.

Soldiers and members of the Moro Islamic Liberation Front (MILF), the largest of four Muslim rebel groups in the south of the mainly Catholic country, exchanged mortar and howitzer shells in the area on Monday night and Tuesday.

Lieutenant-Colonel Jeavy Resureccion, a battalion commander, said the army lost two men and counted the bodies of 17 rebels.

It was one of the bloodiest gunbattles this year between the government and the MILF, who signed a truce in 2003. Sporadic battles still erupt in the area despite the ceasefire.

Nearly 3,000 people fled their homes and farms to escape getting caught in the crossfire and another 1,000 were trapped in a mosque in Midsayap, said army and rebel officials.

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