RTRS- Brazil meat producers want to import Bolivian soy-sources

SAO PAULO, Aug 8 (Reuters) - Meat producers in Brazil's Mato Grosso do Sul state are lobbying the government to approve soy imports from neighboring Bolivia after drought shrank supplies in the world's No. 2 grower, a local official and analysts said on Wednesday.

Farmers want some 300,000 tonnes of Bolivian soybeans to feed their livestock, mostly pigs, a sign that Brazil, the world's top exporter of beef and poultry and growing exporter of pork, suffers from a lack of agricultural planning.

"The federal government is doing a risk analysis because it would be the first time we import soybeans from Bolivia," said an aide for the local government in Mato Grosso do Sul who asked not to be named because she is not an official spokesperson.

"The local government intervened on behalf of these industries because they don't have soy," she said.

Industry groups and conglomerates in southern Brazil have imported small amounts of soy from Paraguay in the past weeks but the government has not stepped in on their behalf.

"Paraguay doesn't have any more soy. Bolivia could be an alternative but they historically haven't had quality soy," said Carlos Davalos, an analyst at Granos Corretora in Mato Grosso do Sul. He said companies in the state have likely imported 18,000 tonnes of Paraguayan soybeans this year.

Brazil's soybean crop, which finished harvest in May, fell to roughly 65 million tonnes from a record 75 million tonnes the year before due to dry weather.

Analysts said farmers were lured by high prices on international markets and the local feeds industry had not prepared adequately for the drought by storing soybeans.

"In the first half of the year China bought a lot of Brazilian soy, so now our stock is zero, in fact it is probably negative," said Alexandre Mendonca de Barros, director of Sao Paulo-based consultancy MB AGRO said.

Speaking on the sidelines of an agro-business conference, he said the scarcity of the grain could drive prices in southern Brazil to $18 per 60-kg bag and the Bolivian soy should not have a problem clearing customs.

Despite the drop in soybean output, Brazil is harvesting a record corn crop. Prices of both grains are rocketing due to drought in the U.S. farm belt and Brazil's exports are expected to reach unprecedented levels going forward.

RTRS- July was hottest month ever for continental U.S. - NOAA

WASHINGTON, Aug 8 (Reuters) - July was the hottest month in the continental United States on record, beating the hottest month in the devastating Dust Bowl summer of 1936, the U.S. government reported on Wednesday.

It was also the warmest January-to-July period since modern record-keeping began in 1895, and the warmest 12-month period, eclipsing the last record set just a month ago, the National Oceanic and Atmospheric Administration (NOAA) said.

This is the fourth time in as many months that U.S. temperatures broke the hottest-12-months record.

The average temperature for July across the contiguous 48 states was 77.6 degrees F (25.3 degrees C), or 3.3 degrees F (1.7 degrees C) above the 20th century average. The previous warmest July, in 1936, averaged 77.4 degrees F (25.2 degrees C).

Along with record heat, drought covered nearly 63 percent of the 48 contiguous states, according to NOAA's Drought Monitor, with near-record drought conditions in the Midwest, where 75 percent of the U.S. corn and soybean crops are grown.

Analysts expect the drought, the worst since 1956, will yield the smallest corn crop in six years, meaning record-high prices and tight supplies. It would be the third year of declining corn production despite large plantings.

The government will make its first estimate of the fall harvest on Friday. It already has cut projections for corn yields by 12 percent due to hot, dry weather in the Farm Belt.

Drought and heat fed each other in July, according to Jake Crouch, a scientist at NOAA's National Climatic Data Center.

Dry soils in the summer tend to drive up daytime temperatures, and because dry soils prevailed over so much of the United States, that helped make things hotter over a wide area, Crouch said by telephone.

"The hotter it gets, the drier it gets, the hotter it gets," Crouch said.

What made this year different from the Dust Bowl summer of 1936 was nighttime temperatures, he said. In the Dust Bowl years, the warmth was largely driven by daytime highs. This July, the record heat was also pushed by warm nighttime temperatures -- the overnight lows weren't that low.

President Barack Obama called on Congress on Tuesday to pass a farm bill so disaster aid can flow to livestock producers. Crop insurance will provide a safety net for row-crop growers but ranchers have much less of a federal cushion. Crop insurance indemnities could be double or triple last year’s level because of the wide-spread drought, say initial estimates by economists.

The drought triggered a surge in the prices for U.S. corn and soybeans to record highs last month, with values rising about 50 percent and 30 percent, respectively, over the past two months.

Sharp price increases the United States, the world’s largest grower and exporter of these two commodity crops, have sparked global concern over potential increases in food prices after a similar surge led to food riots in dozens of countries in 2008.

RTRS- U.S. crops get a break from historic drought

CHICAGO, Aug 8 (Reuters) - Little change in midday weather forecasts were noted for the drought-stricken U.S. Midwest crop region with some relief still expected from showers and cooler temperatures over the next week to 10 da y s, an agricultural meteorologist said on Wednesday.

However, meteorologists also said that a turn to wetter and cooler weather did n o t mean the drought was over.

"No major changes from the theme. There might be a little less rain for southeast Iowa tonight and tomorrow but increased rain in Missouri. There is a little more rain for the weekend in the northwest," said Drew Lerner, a m et eorologist for World Weather Inc.

Lerner said there were no signs that a moisture-robbing heat-producing high pressure ridge would be rebuilding soon over the Midwest crop region.

"No major ridge building, nothing to indicate another buildup of the ridge or extremely hot weather," Lerner said.

The rain and cooler temperatures will provide relief for late-season soybeans, but the change in the weather is arriving too late to help the already severely damaged corn crop.

"It's definitely better than what we've had but I'd be hesitant to call it a drought-buster. Longer-term outlooks still look like a return to warm and dry," said Jason Nicholls, a meteorologist for AccuWeather.

Nicholls said 0.25 inch to 0.75 inch of rain, with locally heavier amounts, was expected in roughly 75 percent of the Midwest from Wednesday through Friday morning, and a similar weather system is expected next week.

"Temperatures will be cooler into the weekend, much more seasonal, then warmer again next week, but not the extreme heat we've had," Nicholls said.

Temperatures in the 80s (degrees Fahrenheit) are expected in the Midwest for the next several days, rather than the 90s F and low 100s F that have been slashing corn and soybean production prospects.

"For the next 10 days we'll chip away at the moisture deficit, but it looks warmer and drier again longer term," Nicholls said.

Corn and soybean prices were driven to record highs in late July as the drought worsened, trimming crop production. Prices for both have since been easing a bit due to the turn to cooler weather accompanied by some showers.

Commodity Weather Group (CWG) on Wednesday said about one-third of the Midwest soybean crop could remain under significant stress from lack of moisture.

CWG also said the popular weather models on which forecasts are based were in some disagreement on Wednesday about the amount of moisture the Midwest is likely to receive over the next couple of days. The dueling forecasts led to some skepticism that significant rains would fall.

And the worst drought in over a half century has spread to the lush U.S. Delta crop region in the lower Mississippi, where vast areas of soybeans, cotton and rice are grown.

"Rain chances are slim in the Delta in the next five days, and stress continues to hinder ... crops in the northwestern half of the region, mainly double-crop soybeans in Arkansas, Mississippi, western Tennessee and western Kentucky," said CWG meteorologist Joel Widenor.

Relentless heat and drought have slashed prospects for the U.S. corn crop to a five-year low. The supply of corn next year is expected to fall to its lowest lever in nearly 20 years. (nL2E8J701W)

The U.S. Department of Agriculture (USDA) on Friday will release its August crop report and traders were bracing for the worst.

U.S. soybean inventories could fall to their lowest level in 32 years as the drought continues to trim U.S. soybean production prospects. (nL2E8J64R1)

Soybean conditions began to stabilize last week on improved weather in a broad swath of the Midwest, while corn conditions declined again. The ratings for both remained the worst since 1988.

RTRS- China's economic slowdown bottoming out, data seen showing

BEIJING, Aug 9 (Reuters) - China's industrial output and fixed-asset investment are expected to show signs of picking up in data on Thursday, indicating that the economy is starting to stabilise after sliding for six straight quarters.

An expected drop in consumer inflation to a 30-month low will suggest the central bank has scope to ease monetary policy further after rate cuts in June and July to keep China's economy on track to meet an official 2012 growth target of 7.5 percent.

Still, any economic pick up will be fragile as the euro zone debt crisis and a sluggish U.S. recovery keep global growth at a low ebb, the main factor that pushed China's new export orders in July into their steepest fall in eight months.

"The recovery will be very modest -- more like stabilisation and gradual improvement," said Yiping Huang, chief economist for emerging Asia at Barclays Capital in Hong Kong.

"Some further policy actions are needed to ensure gradual recovery of growth -- we start to see some improvements that really need to be consolidated and supported," he told Reuters.

China's industrial output growth is forecast to pick up to a four-month high of 9.8 percent year-on-year in July from 9.5 percent in June, a Reuters poll shows. (nL4E8J228I)

Annual growth in fixed-asset investment, in the likes of real estate, roads and bridges, is seen nudging up in January-to-July to 20.5 percent from January-to-June's 20.4 percent, as the government seeks to spur infrastructure investment.

Growth of retail sales, the biggest driver of the economy's expansion in the first quarter, is seen steady though at 13.7 percent.

Economic growth has been sliding since the beginning of 2011, reaching 7.6 percent in the second quarter, the weakest pace since the global financial crisis.

Analysts see a pick up in the third quarter to 7.9 percent and full-year growth of 8 percent, above the official target. (nS7E8CR01Y)

President Hu Jintao and Premier Wen Jiabao have promised to step up policy "fine tuning" in the second half of the year to support the economy.

Apart from cutting rates, Beijing has cut banks' reserve requirements to free up an estimated 1.2 trillion yuan for lending ($191 billion) in a series of moves since November 2011.

It has tweaked taxes and promised to fast-track key government-backed projects. Wen said boosting investment is key to stabilising growth, setting the stage for local officials to roll out ambitious projects.

Analysts expect the data to show consumer inflation in July dropped to 1.7 percent from 2.2 percent in June, a big pullback from a three-year high last July of 6.5 percent.

However, the central bank said in a report last week consumer inflation might rebound after August due to seasonal factors and the rising cost of labour and resources.

Still, there is little sign of inflationary pressures coming from factories. July's data is expected to show that producer prices fell in July by 2.5 percent from a year earlier, its steepest fall since October 2009.

It would mark a fifth straight month of falling producer prices, reflecting the pressures eating into corporate earnings and capping capital spending.

Among the worst hit, profits at Chinese steel mills tumbled 96 percent in the first half of 2012 from a year earlier, the China Iron and Steel Association said in July.

Trader's Highlight

DJI- NEW YORK, Aug 8 (Reuters) - The Standard & Poor's 500 just barely extended a streak of gains to a fourth day on Wednesday, ending above 1,400 in another thinly traded session.

Expectations for stimulus from the European Central Bank and the U.S. Federal Reserve triggered the recent gains, but investors found little reason to keep pushing stocks higher after driving the market to three-month highs.

The three major U.S. stock indexes opened lower but recovered at midday, led by consumer staples .GSPS and health care .GSPA. Both are defensive plays, an indication that investors are keeping their enthusiasm in check.

"It's very positive that we found better footing throughout the session, which indicates that the market's path of least resistance is higher," said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management in Boston.

The hope for central bank action comes amid projections of poor growth for coming quarters and lackluster demand worldwide.

In a sign of that weakening demand, McDonald's Corp MCD.N fell 1.7 percent to $87.53 after reporting flat same-store sales in July, the worst performance for the Dow component in more than nine years. (nL2E8J81UK)

"The idea that Europe will remove itself from the brink is clearly contributing to the tone in markets. There's a feeling that central banks will do whatever it takes to provide liquidity, should things get worse," said Mortimer, who helps oversee $171 billion in assets.

The Bank of England gave little indication that it would rush to pour in further stimulus even as it sharply cut its forecast for medium-term economic growth in Britain. France's central bank forecast a contraction in growth going into the third quarter, citing weak demand from the periphery and Britain. (nL6E8J83Y9) (nL6E8J82R3)

The Dow Jones industrial average .DJI rose 7.04 points, or 0.05 percent, to 13,175.64 at the close. The Standard & Poor's 500 Index .SPX edged up just 0.87 of a point, or 0.06 percent, to finish at 1,402.22. But the Nasdaq Composite Index .IXIC slipped 4.61 points, or 0.15 percent, to end at 3,011.25.

Spanish benchmark 10-year debt yields ES10YT=TWEB briefly rose above 7 percent, underscoring the cautious tone from investors recently disappointed by lack of coordination from European officials in their efforts to reignite the economy.

Markets are pricing in the idea that it may take time until Spain asks for a bailout, which would open the door for ECB intervention. (nL6E8J88MU)

Wednesday's market moves appeared to be largely driven by algorithmic trading, signaling a lack of conviction in any one direction.

Volume was light, with about 5.72 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's daily average of 7.84 billion.

Just under half of the stocks traded on the New York Stock Exchange closed higher on Wednesday, while on the Nasdaq, about 42 percent of shares closed higher.

NYMEX- NEW YORK, Aug 8 (Reuters) - U.S. crude futures fell on Wednesday in choppy trading, snapping a string of three straight higher settlements, after hitting a three-month peak reacting to data showing falling U.S. crude stocks.

U.S. crude oil inventories fell 3.7 million barrels last week, the Energy Information Administration said in its weekly report, a much larger drop than expected.

CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade rose 1 percent to halt a two-day decline, lifted by export demand and positioning ahead of a monthly U.S.government crop report, traders said.

* Unconfirmed rumors swirled that China bought as much as 1 million tonnes of U.S. soybeans this week, along with two cargoes of Argentine soyoil, traders and analysts said.

• USDA said private exporters reported sales of 140,000 tonnes of U.S. soybeans to unknown destinations for 2012/13 delivery. (nW1E8IB022)

• Grain trade awaits USDA's monthly supply/demand reports on Friday. Analysts expect USDA to lower its forecasts of U.S. soybean production, yield and harvested acreage, as well as ending stocks for both 2011/12 and 2012/13. (nL2E8J7353)

• Forecasts for the U.S. Midwest crop belt called for showers and cooler temperatures over the next week to 10 days, potentially helping late-planted soybeans - meteorologist. (nL2E8J82QA)

• The U.S. National Oceanic and Atmospheric Administration said July was the hottest month in the continental United States on record, beating the hottest month in the devastating Dust Bowl summer of 1936. (nL2E8J85IF)

• Meat producers in Brazil's Mato Grosso do Sul state are lobbying the government to approve soy imports from neighboring Bolivia, a local official and analysts said. Farmers want some 300,000 tonnes of Bolivian soybeans to feed their livestock, mostly pigs. (nL2E8J89NI)

• CBOT reported no deliveries of soybeans or soymeal against August futures, while soyoil deliveries totaled 911 contracts.

FCPO- SINGAPORE, Aug 8 (Reuters) - Malaysian crude palm oil prices fell to near eight-week lows on Wednesday on expectations that stocks of the edible oil recovered in July.

Stocks likely climbed in July to their highest since February as exports slow and production rises, snapping four straight months of declines, a Reuters survey showed on Wednesday. (nL4E8J73WI)

Industry regulator Malaysian Palm Oil Board (MPOB) will release official stock and output data on Friday.

"Traders are nervous and funds have built massive long position in grains," said a dealer with a local commodities brokerage in Malaysia. "Fundamentals are not looking good with higher output and tepid demand."

Benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange fell 1.5 percent to close at 2,864 ringgit ($922) per tonne. Prices earlier touched a low of 2,854 ringgit, a level last seen on June 15.

Total traded volume picked up after the midday break to 28,933 lots of 25 tonnes each, higher than the usual 25,000 lots.

For the week, investors are awaiting other key figures, including a monthly supply and demand report from the U.S. Department of Agriculture (USDA) that could provide some clues on soybean production trends and the extent of drought damage.

Tighter supplies of soybeans to be converted into soybean oil could shift vegetable oil demand to cheaper palm oil.

Market participants are also looking out for the Malaysian palm oil export data for the first 10 days of August due on Friday, especially after a dismal showing in July. PALM/ITS PALM/SGS

On the weather front, palm oil investors are watching out for a possibility of El Nino returning to Southeast Asia, as the hot and dry weather pattern could damage palm oil yields for top producers Indonesia and Malaysia.

REGIONAL EQUITY- BANGKOK, Aug 8 (Reuters) - Thai shares climbed to three-week highs on Wednesday, in line with most others in the region, as expectations of better earnings outlook boosted large-cap energy stocks including Thai Oil Pcl TOP.BK and PTT Global Chemical Pcl PTTGC.BK.

The main SET index .SETI rose 0.5 percent, extending its gains for a third day to close at 1,214.13. Thai Oil jumped 4.3 percent, with about 30.26 million shares changing hands, 3.9 times the average full-day volume in the last 30 sessions.

Energy shares, dogged by concerns over the impact of weak global oil prices, have been a target of short sellers, market traders said.

"The poor second-quarter earnings by energy firms, such as Thai Oil, confirmed the worst fears of market investors," said Viwat Techapoonphol, senior strategist of broker Tisco Securities. For Thai Oil earnings report, click (nL4E8IU2KX)

"People are more upbeat on the sector's outlook and we saw short sellers bought back energy stocks today," he added.

Gains in market big-caps lifted other Southeast Asian stock markets, with the Philippine index .PSI up 0.5 percent at a 1-month high of 5,308.67. Bucking the trend, Singapore's Straits Times Index .FTSTI fell 0.5 percent as investors booked profits ahead of a National Day holiday on Thursday