RTRS - Snowstorms and rains welcomed by drought-plagued U.S. farmers

CHICAGO, March 6 (Reuters) - Drought-relieving and crop-friendly snow fell on Tuesday from southern Minnesota and eastern Iowa into the Ohio River Valley, leaving a blanket of 5 to 10 inches of wet snow, an agricultural meteorologist said on Wednesday.

Additional moisture is expected later in the week that will provide more relief to bone dry soils following the worst drought in the United States in more than 50 years.

"A storm this weekend will bring rains to much of the central and southeastern Plains before moving into the Midwest and Delta," said Joel Widenor, a meteorologist for Commodity Weather Group (CWG).

The weekend storm will provide needed relief to Nebraska, northern Colorado, northern and eastern Kansas, Iowa and Missouri, he said.

"The southwestern third of the Plains will receive less moisture," Widenor said. Early fieldwork will be interrupted mainly in the Delta, where one-half to 1.5 inches of rain is likely, he said.

Winter wheat conditions improved across much of the U.S. Plains last week following heavy snow that provided a much-needed boost to soil moisture in areas that have been suffering from drought, according to the U.S. Department of Agriculture's National Agricultural Statistics Service (NASS).

Meteorologists said the significant winter snow and rain had so far eliminated the drought conditions in an area roughly from Illinois eastward.

But more moisture will be needed in April and May to nurse the winter wheat crop to maturity and aid the soon-to-be-seeded corn and soybean crops, meteorologists and crop experts have said.

Don Keeney, a meteorologist for MDA Earthsat Weather, said that as of early February, about 4 inches (10 cm) to 6 inches (15 cm) of rain was needed in Kansas, the top producer of hard red winter wheat, to bring the state out of drought status.

Up to 8 inches (20 cm) was needed in a pocket of severe dryness in northeastern Kansas, a big corn- and grain sorghum-growing area. Similar amounts were needed in Nebraska, Texas, Oklahoma, Iowa and Missouri and northern Illinois and Indiana.

RTRS - Strong oilseed supply to weigh on palm in 2013; biodiesel demand eyed

KUALA LUMPUR, March 6 (Reuters) - Palm oil prices could drop further this year due to swelling supplies of competing commodities such as oilseeds, while high stocks in the world's top consumers and producers of the tropical oil will also drag.

Prices of palm oil plummeted 23 percent last year largely on a stockbuild in major producers Indonesia and Malaysia, and traders and analysts at a conference in Kuala Lumpur said they could fall further when global oilseed supply kicks into high gear later this year.

"In 2013 post-September, we see big supplies of soybeans, sunflower seeds and even of palm oil, which will be entering a new high cycle. We have also begun the oil year with the heaviest carry-over stocks in history," leading industry analyst Dorab Mistry said on Wednesday at the meeting.

Indonesia, the world's top palm oil producer, does not publish official data on inventory levels, but they were estimated at 5 million tonnes in January, while No. 2 producer Malaysia started 2013 with record stocks of 2.63 million tonnes.

"Therefore the outlook further forward, given normal weather, is bearish," continued Mistry, who is also the director of Indian conglomerate Godrej International Ltd.

Conference attendees were also focusing on inventory in top buyers India and China, which rose to record levels in February as traders stocked up ahead of changes in policy by their respective governments. 

Mistry said prices should remain in a 2,300-2,500 ringgit ($740-806) range until end-April, warning that trading may be more volatile due to a looming election in Malaysia. Prices FCPOc3 stood at around 2,400 ringgit on Wednesday.

Palm oil's geopolitical risk was highlighted during the industry meeting, which coincided with a prolonged standoff between the Malaysian military and an armed Filipino group on Borneo island that has forced several refineries there to slow operations.

Improving soybean output from South America, estimated to grow more than 20 percent this year, may push down palm oil prices to 2,200 ringgit after mid-April, Mistry added. A higher soybean supply for crushing into vegetable oil could shift demand away from rival palm oil.

While prices may slump further on expanding palm oil output in July-August, Mistry did not foresee prices falling below 1,800 ringgit unless Brent crude oil drops under $80 per barrel from around $112 on Wednesday

But food and energy demand for vegetable oil should remain supported by low prices, especially after the U.S. Congress passed a blending tax credit for biodiesel in January.

"I am estimating world food demand to grow by 3.5 million tonnes, mainly as a result of lower prices," said Mistry, noting that biodiesel demand worldwide could expand by about 1 million tonnes this year.

Another top analyst, James Fry, posted a more bullish view on biodiesel appetite, saying record high stocks that narrowed Brent crude's premium to palm oil have encouraged much greater use of the edible oil as fuel in local and overseas markets.

"If I were Petronas or Pertamina today, I would be rushing to buy local CPO (crude palm oil) to upgrade into biodiesel for blending with diesel, so as to hold down the costs of supplying motorists with their diesel fuel," said Fry, adding that the higher demand would help stocks decline and push prices to 2,625 ringgit by mid-year.

Analysts, traders and industry officials surveyed by Reuters at the conference saw average palm oil prices this year declining almost 18 percent to 2,420 ringgit from last year's 2,958 ringgit. 

TAXING ISSUES

Tax changes in major producers and consumers that could add more uncertainty to the palm market were also a hot topic at the conference this year.

"Another big unknown is the way Malaysian export taxes will affect Europe's CPO premium over Brent," said Fry, who is the chairman of commodities consultancy LMC International.

Malaysia in October approved a plan to cut crude palm oil export taxes and is setting the tariff on a monthly basis, as it tries to claw back market share from rival Indonesia.

The export tax for March rose to 4.5 percent from zero percent in January and February.

Analysts were also touting a possible hike in the Indian import tax aimed at curbing the country's edible oil purchases that have pushed stocks to a record-high.

"I expect that by August to September 2013, the import duty on unrefined oil will be further hiked to 20 percent and to 27.5 percent on refined oil," Mistry said.

The country currently imposes a 2.5 percent import duty on crude edible oil and 7.5 percent on refined products.

Trader's highlight

DJI - NEW YORK, March 6 (Reuters) - Wall Street mostly edged higher on Wednesday, with the Dow hitting another record, helped by a private payroll survey that bodes well for the monthly jobs report due at the week's end.

Improved labor market data from the private sector sparked the positive tone and boosted confidence for the U.S. government's payroll report on Friday. The data from payrolls processor ADP followed similarly strong reads on housing and the services sector, reports that have contributed to lifting the Dow to historic levels and pushing up the S&P 500 to just 1.5 percent below its own record close.

Continued support from the Federal Reserve and equity valuations that are considered attractive compared with other asset classes have also pushed shares higher, and while some continue to call for a pullback at recent levels, those factors staying in place could keep the positive momentum intact.

"When you reach a record high, it triggers introspection about whether we're overvalued, but I don't expect a pullback because the reasons we've climbed are still in place," said David Joy, chief market strategist at Ameriprise Financial in Boston. "The market has the opportunity to move higher until there's evidence those factors will die out."

Relative to junk bonds, the earnings yield on the S&P 500 - the inverse of the P/E ratio and used for valuation comparisons with bonds - is around 7.5 percent - above the yield to maturity on junk bonds, which is around 6.5 percent, data showed, indicating that stocks have a better value than the riskiest corporate bonds.

The Dow Jones industrial average rose 42.47 points, or 0.30 percent, to 14,296.24, another record closing high. The Standard & Poor's 500 Index edged up 1.67 points, or 0.11 percent, to 1,541.46. The Nasdaq Composite Index slipped 1.77 points, or 0.05 percent, to close at 3,222.36.

The positive catalyst for Wednesday's advance came from signs of improvement on the jobs front. The slowly healing labor market has been one of the weaker spots of the recovery, but data on Wednesday showed private-sector hiring was surprisingly strong in February as companies added 198,000 employees. 

It was an early look at the labor market two days ahead of the U.S. government's closely watched non-farm payrolls report on Friday, which is expected to show the economy created 160,000 jobs last month while the unemployment rate held at 7.9 percent.

"If payrolls come in under 150,000, that could knock the market off stride, but if we got anything north of 175,000, that would give another boost to the market in the short term," said Joy, who helps oversee $675 billion.

Brent Crude Oil - NEW YORK, March 6 (Reuters) - Brent crude futures settled 55 cents lower at $111.06 per barrel on Wednesday after U.S. government data showed domestic crude inventories rose much more than forecast. 

CBOT Soybean - Chicago Board of Trade soybean futures were lower on profit-taking and unwinding of bull spreads ahead of the release on Friday of USDA's March supply/demand and crop production reports, traders said.

* Pressure also stemmed from improving crop weather in the U.S. and in Argentina and on a firm dollar, they said.

·         Position-squaring was beginning to surface ahead of the   release at 11:00 a.m. CST (1700 GMT) on Friday of the U.S.  Department of Agriculture's March supply/demand and world crop   production reports. 

·         An average of analysts' estimates pegged the 2012/13 U.S.  ending soybean stocks at 120 million bushels, below the USDA's  forecast in February for 125 million. 

·         The analyst average for global ending soybean stocks for  2012/13 was 59.448 million tonnes, below the USDA February  outlook for 60.120 million.

·         An average of analysts' estimates for Brazil's 2012/13 soybean production was 83.145 million tonnes, below the USDA  February forecast for 83.5 million. The analyst average for   Argentine soy production was 50.871 million tonnes, below the  USDA February outlook for 53.0 million. 

·         Crop forecaster Lanworth on Wednesday trimmed is forecast  for Brazilian soy production to 80.8 million tonnes from its  previous outlook for 81.0 million and lowered its outlook for Argentine soy production to 49.4 million from its previous forecast for 49.6 million.   

·         Drought-relieving and crop-friendly snow fell on Tuesday  from southern Minnesota and eastern Iowa into the Ohio River  Valley, leaving a blanket of 5 to 10 inches of wet snow, an agricultural meteorologist said on Wednesday. Additional moisture is expected in some areas by the weekend.

·         Minimal showers are seen for Argentina until the weekend,   according to Commodity Weather Group (CWG). "The European model  is then much wetter than the American model. Our forecast leans  toward the wetter outlook and has increased coverage to more  than half the soybean belt," said CWG's meteorologist Joel  Widenor. "This could help to limit stress to less than 20 percent for late soybean development," he said.

·         Soybean spot basis bids were steady to sharply higher at processors, elevators and river terminals around the U.S.    Midwest on Wednesday as farmer offerings remained seasonally   light and demand from end-users remained strong, dealers said.

BMD CPO - KUALA LUMPUR, March 6 (Reuters) - Malaysian palm oil futures ended flat in thin volume on Wednesday, with investors digesting price forecasts by top analysts at the industry's biggest annual gathering to determine their strategies.

The Bursa Malaysia palm oil conference in the Malaysian capital saw main speakers James Fry, the chairman of commodities consultancy LMC International, and Dorab Mistry, head of trading at India's leading speciality chemicals group Godrej Industries present price outlooks for palm oil.

"We should see a short-term bottom at 2,300 ringgit. Most market players are still digesting the price forecasts," said a dealer with a foreign commodities brokerage in Malaysia, referring to Mistry's forecast that prices should range between 2,300 and 2,500 ringgit until the end of April.

The benchmark May contract on the Bursa Malaysia Derivatives Exchange closed flat at 2,400 ringgit ($774) per tonne. Prices were caught in a 2,389-2,413 ringgit range.

Total traded volume was thin, at 20,945 lots of 25 tonnes each, below the average 25,000 lots.

Mistry posted a bearish price outlook on improving global supplies of oilseeds and palm oil in the later part of the year, saying prices could fall to 2,200 ringgit or even lower after mid-April. 

Fry, who spoke earlier just before the market's midday close, said palm oil's low prices had encouraged its greater use in biofuel, and that could help ease record stocks. He also said prices may climb to 2,625 ringgit by mid-year. 

High stocks in Malaysia, the world's No.2 palm oil producer, have caused prices to tumble more than 20 percent in 2012.

A Reuters poll of traders, analysts and government officials at the palm oil forum showed that prices could fall an average of 18.2 percent to 2,420 ringgit per tonne this year as stockpiles continue to weigh.

European imports of palm oil are heading for record highs of 6.4 million tonnes between Oct. 2012 and Sept. 2013, Hamburg-based analyst Oil World said on Tuesday, taking up the slack from lower supplies of soyoil and sunflower oil.

In other markets, Brent futures rose towards $112 a barrel on Wednesday, tracking a rally in equity markets and expectations of a revival in demand growth following positive economic data from the United States and China.

In competing vegetable oil markets, U.S. soyoil for May delivery was almost flat in late Asian trade. The most-active September soybean oil contract on the Dalian Commodity Exchange inched up 0.1 percent.

Regional Equities - BANGKOK, March 6 (Reuters) - Southeast Asian stocks rose on Wednesday as a record close on Wall Street lifted appetite for riskier assets and gains in large caps such as PT Telekomunikasi Indonesia led Indonesia to all-time highs.

Indonesia's Jakarta Composite Index snapped two days of losses to close at 4,824.68, above its record close of 4,811.61 hit on March 1.

Investors bought large-caps such as PT Telekomunikasi Indonesia, which jumped almost 6 percent. In a statement released after market hours, the company said its 2012 net income rose 17.2 percent, due to strong revenue growth.

The Philippine Composite Index climbed 1.8 percent to 6,835.21, its new all-time closing high, with conglomerate Alliance Global Group Inc up nearly 5 percent.

It is now Asia's best performing bourse with a year-to-date gain of 17.6 percent.

In Bangkok, the main SET index was up 0.65 percent at 1,559.35, the highest close since January 1994. However, turnover was relatively weak, falling to 68 percent from a monthly average.

The MSCI's broadest index of Asia-Pacific shares outside Japan gained nearly 1 percent while the MSCI's index of Southeast Asia was up 1.2 percent.