RTRS - U.S. drought has tight hold, snow not seen as big help

Dec 20 (Reuters) - A snow storm moving through the Plains states into the U.S. Midwest brought much-needed moisture to drought-hit states, but drought has such a tight grip on the central U.S. that more moisture will be needed, according to weather experts.

"The snow is good, but in most instances it was less than one inch of liquid and if the soils are frozen, there will be little infiltration," said Brian Fuchs, climatologist with the National Drought Mitigation Center at the University of Nebraska-Lincoln. "Welcomed, yes. A big changer to the overall drought, not really," Fuchs said.

A report issued Thursday by a consortium of federal and state climatology experts said that as of December 18, large swaths of the nation's midsection remained blanketed in extreme and exceptional levels of drought, the worst levels on the measurement scale.

Before the snow storm hit late Wednesday, nearly 27 percent of the High Plains, was considered in the very worst level of drought, exceptional drought. Indeed, "severe," and "extreme" levels of drought also crept higher over the last week, according to the Drought Monitor report.

Severe drought was spread over 86.20 percent of the High Plains, up from 86.12 percent the week before, while extreme drought area was pegged at 59.98 percent of the region, up from 58.39 percent. Exceptional drought was pegged at 26.99 percent, up from 26.91 percent.

Drought conditions were most pervasive in Nebraska, according to the Drought Monitor report.

Overall, roughly 61.79 percent of the contiguous United States was in at least "moderate" drought, a slight improvement from 61.87 percent a week earlier.

The portion of the contiguous United States under exceptional drought expanded, however, to 6.64 percent from 6.49 percent.

The winter storm that hit the region Wednesday night and Thursday brought snowfall of four to eight inches in parts of Nebraska and Kansas, with Iowa and Wisconsin also getting hit.

The storm is expected to move further east across the U.S. Midwest on Thursday, with as much as 12 inches of snow expected in southern Wisconsin.



RTRS - China makes largest cancellation of US soy in 14 years

CHICAGO/WASHINGTON, Dec 20 (Reuters) - China has scrapped purchases of 540,000 tonnes of U.S. soybeans, the U.S. Department of Agriculture said on Thursday, marking the largest such cancellation by the world's top importer of the oilseed in at least 14 years.

It was also the second cancellation this week. On Tuesday, the USDA said China had cancelled purchases of 300,000 tonnes, and traders said that another 120,000 tonnes that were scrapped by buyers the USDA did not specify were likely for China too.

Chicago Board of Trade soybean futures tumbled on the news, falling as much as 2.4 percent, 34-1/4 cents, to a low of $14.02-3/4 a bushel. At 11:30 a.m. CST (1730 GMT), futures were down 1.9 percent, or 27 cents, at $14.10 per bushel.

Prices in the U.S. grain export market also fell sharply due to the cancellations, with basis bids sinking 10 to 18 cents per bushel for soybeans shipped to terminals at the Gulf Coast.

By law, exporters must report promptly the sale of 100,000 tonnes or more of a commodity to the same destination in one day. Sales of smaller amounts are reported on a weekly basis.

Traders said the cancellations were due to a likely bumper crop in Brazil, the world's second-largest soybean exporter, where China could book supplies at much lower prices.

Brazil's government food supply agency Conab forecast the soybean crop at a record 82.6 million tonnes.

Agronomist Michael Cordonnier of Soybean and Corn Advisor consultancy said the weather in Brazil's soybean areas have generally been favorable to the crop and that he expected the harvest to kick off by early January.

"I don't see any reason not to assume a record crop in Brazil," he said by phone from Hinsdale, Illinois.

Garrett Toay, risk management consultant at Toay Commodities Futures Group in Des Moines, Iowa, said China was likely cancelling extra U.S. soybeans it had purchased as insurance in the event of a poor crop in South America.

"They could have overbooked here as protection," he said, adding that it was likely that China was shifting some of its purchases to South America.

"China is assuming there is nothing wrong with the Brazilian crop," Toay said.

After some initial concerns over the weather hurting Brazil's soybean crop, the country seems to be on the path to harvesting a bumper crop early next year.

U.S. soybean export sales in the 2012/13 marketing year (Sept/Aug) totaled more than 30.3 million tonnes as of Dec. 13 - nearly 83 percent of the USDA forecast of 36.61 million.

The majority of the sales - almost 19 million tonnes or 62 percent - were to China.

USDA data showed that 3.1 million tonnes were sold to "unknown destinations," and traders believe a sizable part of the amount was bought by China.

Trader's highlight

DJI - NEW YORK, Dec 20 (Reuters) - U.S stocks rebounded from early losses on Thursday after Republican House Speaker John Boehner said he would keep working on a solution to the "fiscal cliff" while also slamming President Barack Obama's approach to budget talks.

NYSE Euronext was the S&P 500's biggest gainer, surging 34 percent to $32.25 after IntercontinentalExchange Inc said it would buy the operator of the New York Stock Exchange for $8.2 billion.

Republicans in the U.S House of Representatives pushed ahead with their own plan to avoid a series of steep tax hikes and spending cuts due in early 2013, complicating negotiations with the White House. Obama has vowed to veto the plan.

Investors have hoped for an agreement soon between policymakers, but progress has been slow. Boehner said he expected to continue to work with Obama, but repeated his charge that the president and Senate Democrats were trying to "slow walk" the country over the fiscal cliff.

"Speaker Boehner went on the air and basically told us he doesn't like what the president's doing or not doing, and the markets rallied on that, which was kind of weird," said Stephen Guilfoyle, a trader at Meridian Equity Partners, in New York.

The Dow Jones industrial average gained 59.75 points, or 0.45 percent, to 13,311.72 at the close. The S&P 500 rose 7.88 points, or 0.55 percent, to 1,443.69. The Nasdaq Composite climbed 6.02 points, or 0.20 percent, to 3,050.39.

Stocks rallied earlier in the week on signs of progress in the fiscal cliff negotiations. But with the S&P 500 up 14.8 percent so far this year, investors are taking the opportunity to engage in some hedging as 2012 comes to a close.

Herbalife lost 9.6 percent to $33.74 following news that hedge fund manager Bill Ackman was betting against the company as part of his big end-of-the-year short.

The U.S. economy grew 3.1 percent in the third quarter, faster than previously estimated, while the number of Americans filing new claims for jobless benefits rose more than expected in the latest week.

Existing home sales jumped 5.9 percent in November, more than expected, and by the fastest monthly pace in three years. An index of housing shares gained 0.78 percent.

But KB Home slid 6.4 percent to $15.60 as the company reported higher homebuilding costs and expenses in the fourth quarter.

About 6.4 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE MKT, roughly in line with the daily average so far this year of about 6.46 billion shares.

On the NYSE, advancers outnumbered decliners by a ratio of about 2 to 1. On the Nasdaq, five stocks rose for every three that fell.

NYMEX - NEW YORK, Dec 20 (Reuters) - U.S. crude futures edged up on Thursday in choppy trading, supported by data showing the U.S. economy grew faster than previously thought in the third quarter, while U.S. budget talks continued.

CBOT Soyoil - Chicago Board of Trade soybean futures were lower on another cancellation of U.S. soybean export sales by China and improving soil moisture prospects in portions of the U.S. crop growing region, traders said.

* Private exporters on Thursday reported the cancellation of 540,000 tonnes of U.S. soybeans sold to China. The news comes on the heels of China cancelling 300,000 tonnes of soybeans on Tuesday and a cancellation on Tuesday of 120,000 tonnes sold to an unknown destination, believed by traders to have been earmarked for China.

·         China has scrapped purchases of 540,000 tonnes of U.S. soybeans, the USDA said on Thursday, marking the largest such cancellation by the world's top importer of the oilseed in at least 14 years.

 

·         USDA on Thursday said export sales of U.S. soybeans last week totaled 629,900 tonnes, below estimates for 650,000 to 850,000 tonnes.

 

·         The first heavy winter storm of the season hit the U.S. Plains on Wednesday night and Thursday morning, bringing some much-needed moisture to the region. The storm was moving into portions of the Midwest corn and soybean region as well.

 

·         The storm brought much-needed moisture to drought-hit states but drought has such a tight grip on the central U.S. that more moisture will be needed, according to weather experts.

·         The January contract has now fallen below all key moving averages with first major resistance now at its 200-day moving average of $14.74. The nine-day relative strength index is at 29.

FCPO - KUALA LUMPUR, Dec 20 (Reuters) - Malaysian palm oil futures edged lower on Thursday as technical selling hurt prices, although losses were curbed by investor optimism that zero export tax early next year will boost shipments of the crude grade and cut stocks.

Malaysia, the world's No.2 producer of the tropical oil, has faced record high stocks since September, putting prices on track for their worst annual performance since 2008.

The low prices, down almost 27 percent so far this year, have enabled the Malaysian government to set the crude palm oil export tax for January at zero percent, which could see Malaysia grab more market share from top producer Indonesia. Traders are even expecting February taxes to remain at zero.

"Today the market is still trying to find a base. Technically, they are trying to set it down below 2,300 ringgit per tonne," said a trader with a foreign commodities brokerage.

"(But) stocks will reduce very fast starting next year because now everybody can ship crude palm oil," he added.

At the close, the benchmark March contract  on the Bursa Malaysia Derivatives Exchange inched down 0.4 percent to 2,321 ringgit ($760) per tonne.

Total traded volumes stood at 36,567 lots of 25 tonnes each, much higher the usual 25,000 lots.

Technical analysis showed that a bearish target of 2,217 ringgit per tonne has been established for palm oil, Reuters market analyst Wang Tao said.

Exports in the first twenty days of the month fell a 1.9 percent compared to November, cargo surveyor Intertek Testing Services said on Thursday.

Another cargo surveyor Societe Generale de Surveillance reported a slight 0.5 increase for the same period.

Seasonally slowing production towards the year end could give additional support to Malaysia's palm oil prices in the first quarter of 2013, analysts say.

"The first quarter is always the 'low production' season. With the new tax structure kicking in, it should help stimulate demand," said James Ratnam, an analyst with TA Securities in Kuala Lumpur.

"I expect prices to go up in the first quarter, maybe to about 2,800-2,900 ringgit per tonne. But we have to see whether stocks can come down to a more manageable level."

Brent crude slipped on Thursday to trade around $110 a barrel with investors taking profits after recent gains as talks to avert a U.S. fiscal crisis stalled, stoking worries about demand in the world's biggest oil consumer.

In other competing vegetable oil markets, U.S. soyoil for January delivery  fell 0.4 percent in late Asian trade Soybean prices have come under pressure after China scrapped a contract for 300,000 tonnes of U.S. soy recently.

The most active May 2013 soybean oil contract on the Dalian Commodity Exchange fell 1.5 percent.

Regional Equities - BANGKOK, Dec 20 (Reuters) - The Philippines posted a third straight gain on Thursday after Standard & Poor's raised its rating outlook for the country to 'positive' while most other markets in the region saw smaller gains in light volume amid buying interest in laggard stocks.

The Philippine index. ended at 5797.74, pushing closer to last week's record close of 5,831.50. Index heavyweights Ayala Corp and SM Investment Corp were among top gainers with rises of 3.9 percent and 2.8 percent respectively.

In light trade, Singapore finished at its day's high of 3,175.52, the highest close since August last year, and Malaysia ended at its day's high of 1,670.60, the level last seen in early November.

Singapore-listed palm oil firm Wilmar International Ltd jumped 3.1 percent, its biggest one-day gain in more than two months, with trading volume of four times the 30-day average. Wilmar has fallen 34.4 percent so far this year versus a 20 percent gain of the broader Singapore market.

Bangkok's SET index ended slightly lower at 1,377.40, off Wednesday's 17-year peak of 1,378.40. Jakarta's Composite index extended loss for a third session to 4,254.82, the lowest close since Oct. 3.