RTRS - USDA seen trimming U.S., global soy stocks forecasts

CHICAGO, Feb 5 (Reuters) - Stressful crop weather has eroded soybean production prospects in Argentina and should prompt the U.S. Department of Agriculture to tighten its forecast of global soy inventories this week, analysts said.

Domestically, analysts expect USDA to raise its estimate of the U.S. 2012/13 soybean crush, an adjustment that should cause a 4.4 percent drop in soybean ending stocks that are already projected to hit a nine-year low at 135 million bushels by the end of August 2013.

With U.S. supplies so tight, the trade is counting on South America to replenish world soybean inventories. The early harvest is under way in parts of Brazil, which the USDA has projected will surpass the United States as the world's top soy exporter.

However, warm and dry weather has stressed developing crops in Argentina, the No. 3 soybean supplier after Brazil and the United States. The dry conditions represent a sharp turnabout for Argentina, after excessive rains delayed planting in December.

"We are dropping a bit (on production estimates) from Argentina, both from the later plantings as well as the slight dryness beginning to show," Allendale Inc. analyst Rich Nelson said.

The average estimate for Argentina's 2012/13 soybean production among 19 analysts surveyed by Reuters was 53.095 million tonnes, down from USDA's January estimate of 54 million. Estimates ranged from 51 million to 55.7 million.

A 53 million-tonne soybean crop would still represent Argentina's second-largest on record, following its 2009/2010 crop that totaled 54.5 million tonnes.

The average analyst estimate for Brazilian soybean production was 82.645 million tonnes, up slightly from USDA's January estimate for a record-large crop of 82.5 million tonnes. Estimates ranged from 80.9 million to 84 million.

Weather in Brazil has been largely favorable, although excessive rains have slowed the soybean harvest in a few areas and raised questions about crop quality. Brazil's government, which previously estimated the crop at 82.7 million tonnes, will update its official forecast on Thursday.

The expected drop in Argentine production, coupled with forecasts for a smaller U.S. soybean carry-out, should lead USDA to tighten its outlook for global soybean stocks at the end of the 2012/13 marketing year.

The average analyst estimate for world soybean ending stocks was 59.19 million tonnes, down from USDA's January forecast of 59.46 million.

U.S. SOYBEAN STOCKS SEEN SHRINKING

USDA in January projected U.S. soybean stocks at the end of the 2012/13 marketing year at 135 million bushels, the smallest since 2003/04. But several analysts said the government's figure undercounts usage from domestic soy crushers.

These processors have been earning historically high margins by aggressively crushing soybeans into soymeal, a critical source of protein in animal feed, and soyoil, used in foods and biodiesel fuel.

"The real glaring thing on their balance sheets, to me, is that it looks like they have underestimated the crush," said Anne Frick, oilseeds analyst with Jefferies Bache in New York. She predicted USDA would raise its soy crush estimate and lower soybean ending stocks to 120 million bushels.

The average analyst estimate of U.S. 2012/13 soybean ending stocks was 129 million bushels.

However, others said robust U.S. soybean exports are likely to stall in the coming months as the South American harvest hits the market, keeping ending stocks fairly stable.

"Even though we are ahead on export pace, USDA could easily make the assumption that we are going export next to nothing, starting in about three or four weeks," said Jack Scoville, vice president of the Price Futures Group in Chicago.

Trader's highlight

DJI - NEW YORK, Feb 5 (Reuters) - Global equity markets and oil prices bounced back on Tuesday after data showed the vast U.S. services sector extended a three-year expansion in January, while business activity in the euro zone showed signs of recovery.

U.S. and European stocks rallied, with the S&P 500 and Nasdaq gaining more than 1 percent, recouping most of their losses after a sharp sell-off the previous session that was sparked by renewed worries about the euro zone crisis.

A measure of world equity markets also was higher, though only slightly, because of a decline in emerging market shares.

Strong fourth-quarter earnings and signs of improving economic growth suggested the trend for equities remains higher.

"Yesterday was the first real down day of the year, which shows that we are in this strong bull market. Today we are back to the normal pattern. People are realizing that we've over-reacted to Europe yesterday," said Uri Landesman, president of hedge fund Platinum Partners in New York.

The Institute for Supply Management said its U.S. services sector index eased slightly, to 55.2 last month from 55.7 in December. The reading was in line with economists' forecasts, according to a Reuters survey.

In Europe, Markit's Eurozone Composite PMI, based on business activity across thousands of companies and a good gauge of economic growth, rose in January to a 10-month high of 48.6 from 47.2 the previous month.

The day's data bolstered the view that the world economy was improving, a sentiment that has lifted stock markets around the globe and pushed the benchmark U.S. S&P 500 to a fresh five-year intraday high on Tuesday.

Corporate results also helped the rally. With 56 percent of S&P 500 companies reporting, 68.7 percent posted earnings that beat expectations, or better than the 65 percent rate over the past four quarters or the 62 percent pace since 1994.

The Dow Jones industrial average closed up 99.22 points, or 0.71 percent, at 13,979.30. The Standard & Poor's 500 Index rose 15.58 points, or 1.04 percent, at 1,511.29. The Nasdaq Composite Index gained 40.41 points, or 1.29 percent, at 3,171.58.

"We do not envisage prices receding for any great length of time," said Carsten Fritsch, an analyst at Commerzbank. "The supply-side risks still prevailing, shrinking OPEC supplies and the brightening global economic outlook all suggest that such a retreat is unlikely."

The euro rose against the dollar and yen, returning to its months-long trend of appreciation, as better-than-expected euro zone data affirmed expectations that the European Central Bank will keep policy steady when it meets this week.

NYMEX - SINGAPORE, Feb 5 (Reuters) - U.S. crude slipped on Tuesday to trade near $96 per barrel as traders booked profits on renewed euro zone worries following signs of political uncertainty in the troubled region, while a slightly firmer dollar also hurt prices.

CBOT Soybean - Soybean futures on the Chicago Board of Trade rose for a third

session on Tuesday, buoyed by uncertainty about crop weather in

Argentina, traders said.

·         Some midday weather forecasts for Argentina's crop belt looked warmer and drier, raising concern about crop stress in the world's No. 3 soy producer.

·         Crop weather in Brazil remains mostly favorable but rains are expected to slow the harvest in Mato Grosso this week.

·         Brazil's vegetable oils association Abiove raised its soy crop forecast to a record 82.3 million tonnes from 81.6 million in December. The adjustment came a day after Brazilian analytical firms AgRural and Celeres both lowered their forecasts for the crop.

 

·         Canadian canola supplies dropped to a six-year low as of Dec. 31, highlighting a disappointing crop and strong demand for oilseeds, a Statistics Canada report said.

 

·         A group of Paraguayan farmers asked the courts to stop U.S. biotech company Monsanto from charging royalties for use of its genetically modified soybeans in the world's No. 4 soy exporter. The farmers were inspired by a similar case in neighboring Brazil. 

FCPO  - SINGAPORE, Feb 5 (Reuters) - Malaysian palm oil futures eased on Tuesday on profit-taking after four straight sessions of gains, but hopes of better-than-expected inventory and export data next week limited losses.

Persistent concerns over dry weather in South America and its impact on the soy crop there also kept a floor under palm oil prices. Lower soybean oil production could shift some demand to the cheaper palm oil, which in turn may help ease record stocks for the tropical oil.

"We are revising our January inventory forecast to 2.57 million tonnes from 2.66 million tonnes as we believe that exports in the month may have turned out better than expected at a 7 percent decline as compared to our earlier estimate of an 11 percent decline," Alan Lim Seong Chun, research analyst with Malaysia's Kenanga Investment Bank, said in a note.

"Although we believe the overall data will be positive on prices, the upside should still be limited in view of the still high inventory level at way above 2 million tonnes."

January palm oil stocks data from the Malaysian Palm Oil Board is due on Feb. 13. Inventory levels in the world's No.2 producer hit an all-time high of 2.63 million tonnes in December.

Traders are also eyeing Feb. 1-10 export data after a better-than-expected performance in January.

By the close, the benchmark April contract on the Bursa Malaysia Derivatives Exchange had shed 0.7 percent to 2,549 ringgit ($826) per tonne, after adding almost 5 percent in the last four sessions.

It rose to 2,592 ringgit the previous day, just slightly off a 3-month high touched on Thursday.

Total traded volumes stood at 25,536 lots of 25 tonnes each, slightly higher than the average 25,000 tonnes.

In other markets, oil edged higher above $115 a barrel on Tuesday as investor concerns faded about political risks in the euro zone, although ample supply could hinder its chances of extending a three-week rally.

In competing vegetable oil markets, U.S. soyoil for March delivery eased 0.1 percent in late Asian trade, giving up some gains from the previous sessions.

The most active September soybean oil contract on the Dalian Commodity Exchange also edged lower, coming off the previous day's three-month high.

Regional Equities - BANGKOK, Feb 5 (Reuters) - Southeast Asian stock markets ended mostly lower on Tuesday as weaknesses in broader Asia prompted profit-taking, with Singapore falling to a one-week low while Indonesia ending off record high after weaker-than-expected fourth quarter GDP data.

Singapore's Straits Times Index  was down 0.8 percent at 3,272.66, the lowest close since Jan. 29, matching a 0.9 percent fall in the MSCI's broadest index of Asia-Pacific shares outside Japan

Jakarta's Composite index eased 0.3 percent to 4,479.44, climbing at one point to an intraday record of 4,492.53 and after Monday's record finish of 4,490.57.

Stocks in Malaysia and Thailand recouped most of their early losses amid late buying into battered energy names such as PTT Pcl and Petronas Gas Bhd 

Malaysia's index edged down 0.07 percent to 1,633.35 and Thai index eased 0.04 percent to 1,505.72. The Philippines pared early losses to rise 0.5 percent to 6,470.49, topping Monday's record finish of 6,435.98.

Valuations of some Southeast Asian blue chips has recently increased amid optimism about 2013 earnings growth.

"Last week, MSCI Thailand 2013 consensus earnings growth estimates were revised up the most by 35 basis points, followed by MSCI Singapore by 3 bps," Morgan Stanley Research said in its ASEAN weekly chartbook dated Feb. 1.

"During the last one month, PER for Indonesia has increased the most, by 3 percent... MSCI Thailand is currently trading at 16 percent premium to its 7-year average at 12.0x," it said.