RTRS- Barclays raises Q3 corn, wheat and soybean price views

July 12 (Reuters) - Barclays on Thursday raised its corn, wheat and soybean price forecasts for the third quarter, citing the ongoing U.S. Midwest drought.

The bank raised its third-quarter corn price forecast to $6.80 from $5.74 per bushel, wheat forecasts to $7.40 from $6.35 a bushel, and soybean forecasts to $14.80 from $14.25 a bushel.

"Weather remains the key risk as continued drought conditions could impact soybean yields further while corn yields could fall to the 140 to low 140’s bushels per acre level," Barclays said in a note.

RTRS- Goldman cuts U.S. corn yield forecast, ups price view

July 12 (Reuters) - Investment bank Goldman Sachs cut its U.S. corn yield forecast for the second time in less than two weeks to 143.5 bushels per acre from 153.5 bushels per acre and raised its price forecasts for corn, soybean and wheat due to a drought in the U.S. Midwest.

The worst Midwest drought in a quarter century is doing more damage to U.S. crops than previously expected with the U.S. Department of Agriculture (USDA) slashing its estimate for what was supposed to be a record harvest.

"Weather in the U.S. Midwest ended the month of June hotter and drier than expected, with current forecasts for July also pointing to above-average temperatures and more importantly, below-average precipitation," Goldman said in a note to clients.

Goldman's updated yield forecast is below the U.S. Department of Agriculture's (USDA) forecast of 146 bushels an acre. The USDA slashed its forecast on Wednesday, citing the Midwest drought. (nL2E8IB261)

"Our updated yield forecast is 16.5 bushels an acre below what we believe the U.S. corn yield would have been under average weather conditions this summer," the bank said.

"On this metric, it would be the second largest yield loss since 1950 if we exclude 1983 and 1993, years with major floods."

Goldman also forecast a deficit in the U.S. corn balance in 2012/13 for the third consecutive year.

Goldman raised its three-, six- and 12-month price forecasts for Chicago Board of Trade corn futures to $6.90 per bushel, from $6.30 previously.

For CBOT wheat, Goldman raised its price forecasts for the same three time periods to $7.70 a bushel, from $7.15.

For CBOT soybeans, the investment bank raised its three- and six-month price forecasts to $16.25 per bushel from $15.50.

RTRS- Palm oil futures curve points to severe El Nino: Clyde Russell

LAUNCESTON, Australia, July 12 (Reuters) - The curve for Malaysian palm oil futures has moved into a rare contango as the market frets over the possible re-emergence of the El Nino weather pattern and lower soy oil supplies in the United States.

But the curve may have steepened too quickly and appears to be factoring in a worse El Nino than the last major occurrence in 1997-98 and a fairly disastrous soybean harvest in the Americas.

Palm oil futures FCPOc3 traded in Kuala Lumpur now have a steeper curve than soy oil BOc3 contracts in Chicago.

However, the steepening of the curve doesn't necessarily mean that prices for palm oil won't rise, with the benchmark 3-month contract at its widest discount to its soy oil equivalent since October last year.

Given that palm oil has a fairly close correlation to soy oil, it's possible that the prompt month contract could still gain even as the curve flattens out.

To justify the curve steepening in palm oil, there will have to be a significant reduction in future supplies, but this means the threat of El Nino has to become reality, and it has to be a strong event.

The El Nino phenomenon is a warming of sea-surface temperatures in the Pacific that typically leads to wetter weather in the Americas but brings drought to Australia, Southeast Asia and India.

Japan's weather bureau said this week its climate models indicate El Nino will emerge in the northern hemisphere summer, while the U.S. Climate Prediction Center said last week El Nino may strike as early as the third quarter of 2012.

However, the severity of a possible El Nino has yet to be determined. A mild event will have minimal impact on agricultural output and if this turns out to be the case, the curve steepening in palm oil will have been overdone.

The palm oil futures curve was in backwardation, where front-month contracts are more expensive than those for later delivery, as recently as three months ago, when the nine-month future was 3 percent cheaper than the three-month, while the six-month was at a discount of 1.6 percent.

By Wednesday, the curve was in contango with the six-month future at 3,099 ringgit ($973) a tonne, 0.6 percent premium to the three-month, and the nine-month at a 1.2 percent premium.

Given that these futures, which are quite liquid with an open interest of more than 35,000 contracts in the three-month and 5,000 in the nine-month, rarely trade in contango, the switch from backwardation is significant.

If you go back to the last severe El Nino, the nine-month contract traded at a premium of 2.5 percent to the three-month in July 1996, before the event, but by the time it was full-blown in January 1997, it was back to a discount of 3.9 percent.

The curve reverted to contango by July 1997, but returned to backwardation by January 1998.

It is also worth noting that the three-month contract gained 24 percent between July 1996 and January 1997, and then rose a further 97 percent up to July 1998.

This indicates that a severe El Nino will boost the prices of the futures, but that moves into contango along the curve are infrequent and not long-lasting.

There are reasons to be bullish on palm oil, given a slowing in output in major producer Malaysia coupled with strong demand from top buyer India.

Malaysia's production dropped almost 18 percent in the second quarter from the same period last year, while exports rose in June.

This has reduced inventories by 5 percent at the end of June from a month earlier, thereby tightening the market.

Palm oil is also being boosted by soy oil, with the U.S. Department of Agriculture lowering its yield and production estimates in its latest report on the outlook for the world's largest soy bean producer.

But while outright prices may rise in the next few months, it will take confirmation of a strong El Nino to justify the current steepness of the palm oil futures curve.

Trader's Highlight

DJI- NEW YORK, July 12 (Reuters) - U.S. stocks fell on Thursday, hit by more warnings in the technology sector, while a rally in Procter & Gamble PG.N helped the blue-chip Dow cut its loss.

Shares of consumer products giant Procter & Gamble PG.N rose 3.7 percent to $63.70 after a source said activist investor William Ackman appears to be building a stake in the U.S. household products company. (nL2E8IC7Z) Despite the support, the Dow ended lower for a sixth day.

Tech shares remained under pressure, with the S&P technology sector index down 3.5 percent for the month so far. Indian IT heavyweight Infosys Ltd INFY.NS INFY.O became the latest big tech company to warn of sluggish sales, saying global economic uncertainty was hitting technology spending. (nL3E8IC0P5)

U.S.-listed shares of Infosys slid 11.2 percent to $38.75, after earlier dropping to an all-time low of $38.12.

"I think it is the fear that technology companies are going to miss estimates" this earnings period, said Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.

Profit warnings from companies such as Advanced Micro Devices Inc AMD.N have hurt the sector in recent days. The S&P tech sector index .GSPT ended Thursday down 1.1 percent.

All three major U.S. stock indexes recovered from their lows of the day, with the S&P 500 bouncing off its 50-day moving average at 1,334 and the Dow briefly trading higher after hitting technical support at 12,500, analysts said.

The Dow Jones industrial average .DJI shed 31.26 points, or 0.25 percent, to 12,573.27 at the close. The Standard & Poor's 500 Index .SPX shed 6.69 points, or 0.50 percent, to 1,334.76. The Nasdaq Composite Index .IXIC lost 21.79 points, or 0.75 percent, to close at 2,866.19.

The Dow has lost 2.9 percent since its close on July 3.

Overall market sentiment was weak, especially after the lack of any monetary easing by the Bank of Japan on Thursday, and few clues on Wednesday in the minutes from the Federal Reserve's June policy meeting. The lack of policy moves suggested major central banks were still cautious about the need for further easing.

On the earnings front, Bank of America Merrill Lynch Global Research lowered its forecast on the S&P 500's 2012 earnings per share to $102 from $103.50, and for 2013, to $109 from $110.50.

The forecasts were cut "to reflect the impact of lower commodity prices and slower global growth on corporate profits," BofA Merrill Lynch Global Research analysts said in a note.

Data on the economy showed some promising signs, however. Initial claims for state unemployment benefits in the United States dropped to the lowest in four years.

Other economic data showed U.S. June import prices fell 2.7 percent, the most in more than three years, due to a plunge in the cost of imported oil, further icing inflation pressures. (nOATCIE85L)

Volume was a bit lighter than average. About 6.46 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, compared with the year-to-date daily average of 6.85 billion shares.

Decliners beat advancers by a ratio of about 19 to 11 on the NYSE and on the Nasdaq, by about 3 to 2.

NYMEX- NEW YORK, July 12 (Reuters) - U.S. crude futures edged up on Thursday in choppy trade, rallying after the United States announced new sanctions on Iran, said fronts for Iran's tanker companies had been exposed and as a North Sea production problem added to a tight supply outlook.

 

CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade unofficially ended higher on worries that mostly dry weather in the U.S. Midwest would further reduce crop yields, traders said.

* A 3 percent rise in CBOT corn added support.

* But rain, while welcome, limited gains in the Mississippi

River Delta and the mid-South crop regions.

* Nearly two-thirds of the Midwest region was in some stage of drought in the week ended July 10, up from just over 50 percent a week earlier, according to the U.S. Drought Monitor. (nL2E8ICBZM)

• The U.S. Midwest should see only minor rains over the next week to 10 days, forecasters said. The updated midday run of the U.S. weather model was drier than the previous one, moving closer toward the European model's outlook. (nL2E8IC96M)

• Investment bank Goldman Sachs cut its U.S. corn yield forecast for the second time in less than two weeks and raised its price forecasts for corn, soybean and wheat due to dry U.S. weather. Goldman raised its three- and six-month price soybean forecasts to $16.25 per bushel, from $15.50. (nL3E8IC2B6)

• Barclays raised its third-quarter soybean price forecast to $14.80 per bushel, from $14.25, citing the ongoing U.S. drought. (nL3E8IC3FA)

• USDA reported export sales of U.S. soybeans in the latest week at 759,200 tonnes (old and new crop years combined), above trade expectations for 375,000 to 650,000 tonnes.

• USDA reported weekly export sales of U.S. soymeal at 169,600 tonnes and soyoil sales at 33,900 tonnes, both in line with trade expectations.

FCPO- SINGAPORE, July 12 (Reuters) - Malaysian crude palm oil futures tumbled on Thursday, as traders took profit, prompted partly by a forecast for rain over the weekend in the drought-hit, soy-producing U.S. Midwest that could ease concerns of tight oilseed supply.

Lower Malaysian palm oil exports for the first 10 days of July also fuelled some of the declines, as the market had largely priced in lower ending stocks in June and strong Asian festival demand for the past few weeks.

"All the bullish factors have already been laid on the table, so traders just have to take profit and decide on what to do next," said a trader with a foreign commodities brokerage in Malaysia.

"The rain in a way helped ease the market because it was on a bullish weather run. But if the rain doesn't materialise, traders will put their money back into the market."

Benchmark September palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange lost 2.3 percent to close at 3,012 ringgit ($944) per tonne.

Traded volumes stood at 45,851 lots of 25 tonnes each, much higher than the usual 25,000 lots.

Technicals were bearish as palm oil is expected to drop to a support at 2,970 ringgit, a break below which will open the way towards 2,919 ringgit, said Reuters market analyst Wang Tao. (nL3E8IC0DY)

The weather is expected to turn wetter for parts of the U.S. Midwest, Commodity Weather Group said in a note to clients on Wednesday, offering some relief on the tight global oilseed supply situation. (nL2E8IB9HN)

But the U.S. Department of Agriculture (USDA) cut soybean yields due to the persistent drought and analysts said that could be supportive for palm oil prices. (nL2E8IB261)

Market players are also on the lookout for the possibility of El Nino returning to the region as dry weather could cut palm oil output, further eating into 14-month-low palm oil stocks in June.

While cargo surveyors said Malaysia's palm oil exports fell sharply from July 1 to 10, the market was expecting more orders to come in as the Asian festival season gets underway with China and India celebrating key holidays from September to November. PALM/ITS PALM/SGS

REGIONAL EQUITY- BANGKOK, July 12 (Reuters) - Southeast Asian stock markets closed mostly lower on Thursday as concerns over global growth outlook prompted selling in large caps such as telecoms and a drop in oil prices weighed on energy linked shares.

Thai SET index .SETI slid 1.3 percent, retreating after notching up a 1.8 percent gain over the past two sessions. Telecoms group Shin Corp Pcl INTUCH.BK dropped 4.2 percent after Wednesday's 4.3 percent gain.

Malaysia .KLSE, Singapore .FTSTI and Indonesia .JKSE also ended their two-day gains. Malaysia's benchmark index .KLSE finished down 0.24 percent at 1,625.49, climbing at one point to 1,632.94, its intraday record high.