RTRS - INTERVIEW-Brazil soy quality rises but logistical headaches worsen

BRASILIA, Feb 26 (Reuters) - The quality of Brazilian soybeans is improving as rains that disrupted early harvest let up, the head of the national soy producer association said on Tuesday, but concerns are growing over long delays in getting beans through crowded ports.

The U.S. Department of Agriculture expects Brazil's production of soybeans to surpass that of the United States for the first time this season with 83.5 million tonnes versus 82 million, straining transport infrastructure to the limit.

Rains from early in the harvest in January slowed the flow of product from top soy-growing state Mato Grosso and many early-harvested beans are being sold at a discount due to moisture damage, Aprosoja's Glauber Silveira said.

"Mato Grosso is already starting to harvest better-quality grains now. Rains are easing," Silveira said during a guest appearance on Reuters Global Ags Forum, an online chat room for grain traders.

Brazilian weather forecaster Somar expects rains to continue this week in the key center-west region where Mato Grosso is situated, but then to shift to the south by early March.

Soy futures in Chicago for March delivery SH3 settled down 3-1/2 cents at $14.47-3/4 a bushel on Tuesday, pressured by prospects for a good South American harvest between Brazil and world No. 3 producer Argentina.

Though the weather has improved for harvesting, getting the crop to port would be a major hurdle, Silveira said. A truck shortage and clogged ports have led to queues of more than one month for ships to load even before peak harvest.

"The queues will get worse ... Costs for transport will without doubt keep rising," Silveira said, adding this burden would largely fall on trading houses. He estimated producers had forward-sold 70 percent of the crop, locking in their price.

"Producers who haven't sold yet may take a hit, though," he said, since traders facing higher costs would likely make lower offers to reduce the impact on their margins, which are being squeezed by spiking transport costs.

The soy sector says it is unable to speed this year's export flow, which is likely to be the most chaotic ever as record production is funneled through ports that have failed to expand in tandem with grains output.

New regulations this season have also restricted the hours truckers can spend behind the wheel each day, slashing road haulage capacity.

The opening of a river port in the north of the country, likely by next year, will provide some relief for next season. Critical rail and road projects costing tens of billions of dollars, however, will take several years to build.

Exacerbating the risks this year, unions representing the country's dock workers could resume strikes after mid-March unless the government modifies plans to reform port regulations, which they say could cost jobs and cut wages.

Silveira said logistics woes were eroding Brazil's edge over the United States in terms of production costs. He expected the two countries' output to be "neck and neck" and it was not yet certain Brazil would claim the rank of top producer this year.

"But I hope so!," he said.

Trader's highlight

DJI - NEW YORK, Feb 27 (Reuters) - U.S. stocks rose on Wednesday, with major indexes posting their best daily gains since early January, as Federal Reserve Chairman Ben Bernanke remained steadfast in supporting the Fed's stimulus policy and data pointed to economic improvement.

In a second day before a congressional committee, Bernanke defended the Fed's buying of bonds to keep interest rates low to boost growth. The market's jump of more than 1 percent also came on better-than-expected data on business spending plans and the housing market.

Bernanke's remarks helped the market rebound from its worst decline since November and put the S&P 500 index back above 1,500, a closely watched level that has been technical support until recently. The Dow Jones industrial average closed at a level not seen since 2007 as it again pulled within striking distance of an all-time high.

Speaking before the House Financial Services Committee, Bernanke downplayed signs of internal divisions at the Fed, saying the policy of quantitative easing, or QE, has the support of a “significant majority” of top central bank officials.

Bernanke removed a headwind from markets arising from concerns the Fed's quantitative easing might end earlier than anticipated. Doubts about the Fed's intentions had broken a seven-week streak of gains by stocks.

"The Fed continues to encourage risk-taking in markets, which is a powerful tool that makes the danger not being long stocks, not in being too long," said Tom Mangan, a money manager at James Investment Research Inc in Xenia, Ohio.

The Dow Jones industrial average was up 176.32 points, or 1.27 percent, at 14,076.45. The Standard & Poor's 500 Index was up 19.07 points, or 1.27 percent, at 1,516.01. The Nasdaq Composite Index was up 32.61 points, or 1.04 percent, at 3,162.26.

The S&P turned very slightly higher on the week, recovering from the index's biggest daily drop since November on Monday. That drop came on concerns over Italy's election, as well as over sequestration - U.S. government budget cuts that will take effect starting on Friday if lawmakers fail to reach an agreement on spending and taxes.

The index had climbed 6.3 percent for the year before pulling back on concerns about Fed policy and inconclusive elections in Italy, which rekindled fears of a new euro zone debt crisis.

"While the rally remains intact and there are reasons to be long-term bullish here, there are also reasons to not be surprised if we get a correction," said Mangan, who helps oversee $3.7 billion.

Brent Crude Oil - Feb 27 (Reuters) - Brent crude oil futures for April delivery fell 84 cents to settle at $111.87 a barrel, as investors weighed expectations that the Federal Reserve's stimulus program will be maintained against the sixth straight weekly rise in U.S. crude oil stockpiles.

NYMEX - SINGAPORE, Feb 27 (Reuters) - U.S. crude futures edged towards $93 a barrel on Wednesday after Federal Reserve Chairman Ben Bernanke eased fears of an early retreat by the Fed from its economic stimulus, although worries about Italy's inconclusive election should cap gains.

CBOT Soybean - Soybean futures on the Chicago Board of Trade rose, halting a three-day slide, lifted by export demand for dwindling supplies of U.S. soybeans and worries about Brazilian harvest delays, traders said.

* USDA said private exporters reported sales of 120,000 tonnes of U.S. soybeans to unknown destinations for delivery in the current marketing year and another 120,000 tonnes to China for delivery in 2013/14. 

·         Concerns are growing over long delays in getting newly   harvested Brazilian soybeans through crowded ports, the head of the national soy producer association said on Tuesday.

·         Further support from strong cash markets and expectations   of no deliveries of soybeans, soymeal or corn on first noticeday for CBOT March futures on Thursday. Soyoil deliveries were   estimated at 1,000 to 4,000 contracts. 

 

·         Basis bids for soybeans shipped by barge to the U.S. Gulf Coast were steady to slightly lower early on Wednesday, but persistent export demand gave the market underlying support.

·         United Grain Corp locked out union workers at its Port of Vancouver grain export terminal in the U.S. Pacific Northwest after an investigation unearthed evidence that a union leader  sabotaged equipment there, a spokesman for the grain company said.

·         Soyoil ends higher despite spillover weakness from  Malaysian palm oil futures, which fell to a near six-week low.

 

·         Wall Street rallied for a second day as Federal Reserve Chairman Ben Bernanke reaffirmed his strong support for the Fed's stimulus efforts.

BMD CPO - KUALA LUMPUR, Feb 27 (Reuters) - Malaysian palm oil futures inched down on Wednesday to a near six-week low, stretching losses into a sixth straight session with investors remaining cautious that uncertain overseas markets could weigh on demand for the tropical oil.

Prices had crept up 0.7 percent by the midday break as traders retraced from liquidations earlier in the week, but dropped later to as low as 2,395 ringgit per tonne.

Market players are now watching Italy's 6.5 billion euro auction of new 5- and 10-year bonds which kicked off at 1000 GMT for further trading cues.

"There was some retracement in the market earlier but it could not sustain itself because there was no fresh news at those levels, so prices have come under more selling pressure," said a trader with a local commodities brokerage in Malaysia.

The benchmark May contract  on the Bursa Malaysia Derivatives Exchange fell 0.4 percent to 2,410 ringgit ($777) per tonne by the day's close. Prices traded in a tight range between 2,395 and 2,443 ringgit.

Total traded volume stood at 34,090 lots of 25 tonnes each, higher than the usual 25,000 lots.

Palm oil production in Malaysia, the world's No.2 producer, has slowed from its seasonal peak in September. At the same time stronger-then-expected exports of Malaysian palm oil products -- the cheapest in the world -- are widely expected to help ease inventory levels that are still high.

"With a rising export trend and falling production rate, we see a good chance the stockpile levels in February could come down," said Phillip Futures analyst Ker Chung Yang in Singapore. He expects end-stocks in February to fall to 2.2 million tonnes from 2.58 million now.

But the uncertainty in Europe has hampered any sustained rally in palm, as investors fret over political gridlock in Italy which they fear could reignite the euro zone financial crisis and weaken global markets.

"The inconclusive Italy scenario is worrying for the market, not only for palm oil but the commodities and equities markets as well. It's a timely reminder for global investors that the European crisis is not over yet," added Ker.

In other markets, oil traded near $113 a barrel, edging up from a one-month low, as world powers ended two days of talks with Iran over its nuclear work with no sign of a breakthrough.

In competing vegetable oil markets, U.S. soyoil for May delivery rose 0.1 percent in early Asian trade. The most-active September soybean oil contract on the Dalian Commodity Exchange inched down 0.9 percent.

Regional Equties - BANGKOK, Feb 27 (Reuters) - Indonesia's benchmark stock index rallied to a record closing high on Wednesday thanks to solid gains in large market caps such as PT Telekomunikasi Indonesia  and as upbeat Standard & Poor's report lifted appetite for banking shares.

Jakarta's Composite Index  rose 1.14 percent, the biggest gain in more than five weeks, to 4,716.42, above Monday's record close of 4,696.11. Shares in Telkom Indonesia, the most actively traded by turnover, jumped 3.1 percent.

Banking shares were in favour, led by a 2.9 percent gain in Bank Rakyat Indonesia, with Standard & Poor's expecting Indonesian banks to maintain strong profitability, high loan growth, and sound capitalisation this year.

Others in the region came off day's highs, with late selling sending Thai stocks to two-week lows. The Philippines  edged down 0.22 percent to 6,616.27, extending its loss for a second session after Monday's record close of 6,721.33.

The region saw mixed foreign flows on the day. According to traders, Indonesia saw inflows of 813 billion rupiah ($83.75 million) on the day while the Malaysian bourse reported foreign buying of 125 million ringgit ($40.30 million).

The Thai stock market saw foreign selling of 204 million baht ($6.84 million), stock exchange data showed.

Chang Chiou Yi, a regional strategist at CIMB-GK Research, has an 'overweight' rating on Indonesia and Thailand.

"Both markets have embarked on an investment upcycle. Stable politics have helped business decision and there remain structural positives such as the rising income base, property demand and upcountry spending demand," Chang said.