RTRS- PREVIEW-India's July refined palm oil imports seen down

NEW DELHI, Aug 10 (Reuters) - India's refined palm oil imports are expected to have fallen in July for the second month in a row as importers feared the world's top vegetable oil buyer would raise duties on purchases to cut cheap supplies from Indonesia, a Reuters survey showed.

Traders forecast refined palm oil imports in July to be between 75,000 and 120,000 tonnes, with the average at 96,000 tonnes, down 22.7 percent from June.

The government finally raised the cost of imports from Aug. 1.

India's refined palm oil imports have risen since October 2011, when Indonesia, the world's No. 1 palm oil producer, changed its export taxes to promote downstream products. That prompted India's domestic refiners to demand measures to make the imports costlier.

The Solvent Extractors' Association of India, a leading trade body, will release July import data next week.

In the first eight months of the current year from November, India's refined palm oil imports surged by 89 percent to 1.2 million tonnes from the year-ago period, hitting margins for local refineries.

Traders said refined palm oil imports would return to around last year's average of 90,000-100,000 tonnes a month after the introduction of the protective step.

Total palm oil imports last month rose as prices eased by 4.8 percent, supported by a build-up of stocks in Malaysia, the world's No. 2 producer, and the euro zone crisis.

Palm oil imports rose 9.8 percent last month to 563,750 tonnes, according to the average of a survey of eight traders.

On Friday, benchmark October crude palm oil futures FCPOc3 on the Bursa Malaysia hit a low of 2,844 ringgit ($920) per tonne, back to the lowest levels this year touched on June 15.

Imported refined palm oil was quoted at around $990 per tonne on a cost and freight basis on India's west coast, while imported crude palm oil was quoted at $970 per tonne.

Imports of soyoil rose in July due to the arrival of delayed vessels from South America, while sunflower imports fell, reflecting lower demand for fried foods during the summer.

Soyoil imports in July are seen up 7.7 percent from June to 150,625 tonnes, while monthly sunflower oil imports were down by 11.8 percent to 77,500 tonnes in July, the survey showed.

Total July vegetable oil imports, including small amounts of non-edible oils, are likely to have risen by 4.7 percent to 820,500 tonnes from June.

The higher imports pushed up end-July stocks at Indian ports by 5.8 percent to 750,00 tonnes, it showed.

Imports of vegetable oils are unlikely to drop in the coming months as India's first drought in three years could reduce oilseeds output, leading to more imports in the next year from November.

"Imports could rise to as high as 950,000 tonnes in August," said Sat Narain Agarwal, a Delhi-based trader.

Indian importers will start building up stocks for the September-November festival season, taking advantage of low crude palm oil prices, he added.

About 80 percent of India's total cooking oil imports are palm oils, while the rest are soft oils.



RTRS-UPDATE 5-Argentina hikes biodiesel tax; soy export tax unchanged

BUENOS AIRES, Aug 10 (Reuters) - Argentina tightened its grip on the country's energy sector on Friday by ordering a tax hike on biodiesel exports, a move it said was needed to make domestic fuel prices more affordable, but denied market rumors that it will increase a soybean export tax.

The grains-rich South American country is the world's biggest exporter of biodiesel, a fuel made from soybean oil. The tax, which will go to 32 percent from 20 percent, will go into effect on Saturday, according to a government decree.

The European Union is by far the biggest market for Argentina, which shipped a total of almost 900,000 tonnes of biodiesel in the first half of 2012 for some $1.03 billion, according to industry data.

Government economist Axel Kicillof, who burst onto the national stage when he became the public face of Argentina's nationalization of energy company YPF YPFD.BA in April, justified the tax hike by saying that Argentines are paying more for biodiesel than are foreign buyers.

"This will reduce the domestic price of biodiesel," he told reporters.

Also on Friday the government issued a decree lowering the official price of domestic biodiesel by 15 percent to 4,405 pesos ($0.96) per tonne from 5,195.8 pesos.

"There's not enough demand in the local market to absorb all the biodiesel that's exported," an industry source told Reuters on condition of anonymity. "I think this will end up killing the industry."

Argentine biodiesel production in 2011 was 2.4 million tonnes, of which 1.7 million was exported for about $2.1 billion. The country plans to reach 4.5 million tonnes of annual production by 2013.

Argentine biofuels producers had hoped President Cristina Fernandez would soon raise the compulsory blend requirement for diesel sold domestically to 10 percent from the current 7 percent as a way to boost local demand.

But Kicillof dashed that idea during his comments to reporters. He also dismissed rumors that the government was mulling an increase of export taxes on soybeans, which is currently set at 35 percent.

"This is a better measure than ones that would increase soy export taxes. This is a better way to go," said Kicillof

Chatter about a possible tax hike on international shipments of soy and other raw grains has been in the markets from Chicago to Rosario over the last two weeks, putting downward pressure on prices.

TIGHTER STATE CONTROL

The Fernandez government controls corn and wheat exports through a system of curbs meant to ensure affordable domestic food supplies. The 59-year-old Peronist leader was re-elected last year on promises of increasing the government role in Latin America's No. 3 economy.

The seizure of YPF followed and then a decree was issued last month saying oil companies operating in Argentina must present an annual investment plan. They could face fines or other sanctions, such as the withdrawal of concessions, if they fail to comply.

With its ample water supplies and vast Pampas farm belt, grain powerhouse Argentina is the world's No. 2 corn exporter and No. 3 supplier of soybeans.

But the idle capacity of the country's crushing plants has risen recently due to lower-than-expected soybean output, caused by a drought that hit the Pampas during the 2011/12 growing season.

So, also on Friday, the government lifted a ban on soybean imports, which will now be available to help keep Argentine crushing plants busy.

"We want 100 percent of our biodiesel processing plants to be used by either domestic or imported beans," Kicillof said.

Trader's Highlight

DJI- NEW YORK, Aug 10 (Reuters) - U.S. stocks notched a gain for the sixth session in a row on Friday, while the euro faltered as gloomy Chinese economic data butted up against expectations policymakers could act to shore up the world's economies.

Stock markets' recent rally has been underpinned by comments by European Central Bank President Mario Draghi two weeks ago that the central bank was "ready to do whatever it takes to preserve the euro," raising hopes of heavy bond buying to aid Spain and Italy.

A weaker-than-expected reading in China's July exports on Friday, however, soured the mood and took U.S. stocks lower for most of the day. In addition, new bank loans in China were at a 10-month low, suggesting pro-growth policies have been insufficient and that more urgent action may be needed. The weakness in exports included a 16 percent drop in sales to Europe from a year ago.

"The data from China is concerning because the global economy is still the backdrop for the market. People are still very cautious because of the global growth concerns," said Paul Brigandi, vice president of trading at Direxion Funds in New York.

Some economists said the Chinese central bank could move as early as this weekend to ease policy.

European shares closed lower but Wall Street recovered late in the day in thin trade. The euro headed for its first weekly drop against the dollar and yen in three weeks.

"It makes sense that we'd take a bit of a breather, but momentum has been strong and the fact that we've held steady despite a lack of good news is a good sign the trend will continue," said Joe Bell, senior equity analyst at Schaeffer's Investment Research in Cincinnati.

NYMEX- NEW YORK, Aug 10 (Reuters) - U.S. crude oil futures fell Friday on demand worries, as China's oil imports fell and its total exports were less than expected in July while the International Energy Agency forecast lower growth for oil demand for next year.

For the week, September crude ended higher, gaining for a second straight week. Gasoline futures ended fractionally higher and heating oil dipped 0.8 percent. Both product futures rose for the week, also extending weekly gains to a second in a row.

CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade rose for a third day after the U.S. Department of Agriculture slashed its forecasts of U.S. 2012/13 soy production and ending stocks, traders said.

However, the market pared gains by the close as traders booked profits and as corn and wheat futures fell.

Most-active November soybeans SX2 ended up 0.9 percent for the week, the contract's second straight weekly gain and the seventh in eight weeks.

USDA cut its U.S. 2012/13 soybean production forecast to 2.692 billion bushels, from 3.050 billion in July and below trade estimates for 2.817 billion.

USDA lowered its estimate of the U.S. soy yield to 36.1 bushels per acre, below the average trade estimate of 37.8. It projected U.S. soybean harvested area at 74.6 million acres, below the average estimate of 74.8 million.

USDA cut its forecast for U.S. 2012/13 soybean ending stocks to 115 million tonnes, down from 130 million in July but above an average of trade estimates for 112 million. If realized, the stocks-to-use ratio would be 4.19 percent, the lowest since 1964/65.

Continued export demand from China added support. USDA said private exporters sold 290,000 tonnes of U.S. soybeans to China for 2012/13 delivery.

Argentina ordered a tax hike on biodiesel exports, a move it said was needed to make domestic fuel prices more affordable, but denied market rumors that it will increase a soybean export tax.

FCPO- SINGAPORE, Aug 10 (Reuters) - Malaysian crude palm oil futures ended off an 8-week low on Friday, and posted a fifth straight weekly loss with traders positioning ahead of a key report by the U.S. Department of Agriculture (USDA) later in the day.

Palm oil initially went to its lowest since June 15 after cargo surveyor Intertek Testing Services reported a 1.8 percent fall in exports for the first ten days of August from a month ago. PALM/ITS

But prices pulled back on short-covering ahead of USDA's monthly supply and demand report at 1230 GMT that is likely to show a tighter soy output and squeeze soybean oil supply, shifting some demand to palm oil.

"The USDA report tonight is the most important. If it is bearish, we will see palm oil go down fast to 2,700 and 2,600 ringgit. If it is bullish, it will try to crawl above 3,000 ringgit," said a Malaysian planter.

"People will be watching Olympics but I will be watching the USDA report."

At closing, the benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange edged up 0.6 percent to 2,882 ringgit ($925) per tonne. Prices touched a low of 2,844 ringgit, a level last seen on June 15.

Palm oil ended the week 1.2 percent lower, the fifth consecutive week that the edible oil is in the red.

Total traded volumes were high at 28,005 lots of 25 tonnes each on short-covering, compared to the usual 25,000 lots.

REGIONAL EQUITY- Aug 10 (Reuters) - Southeast Asian stock markets ended mostly firmer on Friday, with Indonesia near a three-month high led by financials and on large foreign inflows. Thailand advanced for a fifth straight session.

The region's markets were down in early trade due to weak Chinese trade data for July, but recouped losses later in the day.

Jakarta's Composite Index .JKSE nudged up 0.25 percent, led by a 2.1 percent gain in Bank Rakyat Indonesia Tbk BBRI.JK. The index hit near its highest level since May 9 fed by a net foreign inflow of $70.59 million.

Thailand's top oil firm PTT PTT.BK, with a 1.8 percent gain, helped Thai SET index .SETI add 0.14 percent to close at its highest since July 18.

Singapore's Straits Times Index .FTSTI ended 0.1 percent firmer.

Malaysia .KLSE rose 0.2 percent while the Philippine index .PSI finished 0.1 percent stronger.

RTRS-Brazil raises official 2011/2012 corn crop estimate

SAO PAULO, Aug 9 (Reuters) - Brazil's government raised its estimate for the 2011/12 corn crop to a record 72.7 million tonnes on Thursday, compared to its 69.48 million tonne forecast from July.


It kept its forecast for the now completed soybean crop nearly the same at 66.4 million tonnes compared to 66.37 million tonnes from July.

RTRS- Minimal drought relief forecast for US crops

CHICAGO, Aug 9 (Reuters) - Midday weather updates on Thursday show no major let-up from the relentless drought in the U.S. Midwest that has slashed the corn crop and is now eating away at soybean production prospects, an agricultural meteorologist said.

"No significant shift from the pattern short term, there will be a few light showers but no soaking rains," said Kyle Tapley, meteorologist for MDA EarthSat Weather.

Tapley said light showers and cooler temperatures could be expected through the balance of this week which will provide minimal relief to crops that have been struggling against the yield-robbing impact of the worst drought in 56 years.

"The six to 10-day (next week) is for drier weather with highs in the 90s (degrees Fahrenheit/32-37 degrees Celsius) and drier and cooler weather could be expected in the 11-15 day forecast (into mid-August) in Missouri, Illinois, Indiana and Ohio," Tapley said.

Elsewhere in the Midwest, the outlook for two weeks out is for only minimal showers but cooler temperatures as the 2012 heat wave begins to wind down, Tapley and other meteorologists said.

"There will be some improvement, the cooler temperatures certainly will help. But most of the Midwest has not had enough rain for significant improvement," said Andy Karst, meteorologist for World Weather Inc.

"Crops may stabilize or decline a little more the next couple of weeks," he added.

Rainfall this week totaled 0.25 to 1.00 inch (0.6-2.5 cm) and was scattered over about half of the Midwest, but only about 25 percent received the heavier amount.

"There will be better rains today in the eastern Corn Belt, and the good news is that high temperatures the next couple of weeks will be in the 70s to 80s degrees Fahrenheit rather than 100 F," Karst said.

But "certainly no drought busting rains," he stressed.

Another round of modest showers were forecast for next week that will mimic the occasional downpours of the past couple of days, Karst said.

Commodity Weather Group (CWG) said the Midwest should be slightly wetter and cooler for the next two weeks, but soybeans in the U.S. Delta, a lush crop region near the lower Mississippi Valley, would be drier for the next 10 days.

That dryness would add stress to an already struggling soybean crop.

"Shower potential has become more limited in the next 10 days in the Delta. This will pose the greatest threat to double-crop soybeans in areas of Arkansas and bordering sections of Tennessee and Mississippi," said CWG meteorologist Joel Widenor.

Chicago Board of Trade corn futures soared to record highs on Thursday and the soybean market leaped over 3 percent as investors bought, bracing for government and private projections of sharp declines in domestic crop prospects.

USDA on Friday will release its August crop report and traders were getting prepared for another bull run in prices.

Domestic corn inventories could fall to a 17-year low next summer following this year's harvest, and soybean supplies could drop to their lowest in 32 years as drought continues to trim production prospects, according to a Reuters poll of grain analysts.

Soybean conditions began to stabilize last week on improved weather in a broad swath of the Midwest, while corn conditions declined again. Still, the ratings for both remained the worst since 1988. (nL2E8J635O)

In the past week, extreme drought doubled its grip on the top corn and soybean producing state of Iowa, according to a report by a consortium of climate experts issued Thursday.

The area under extreme drought in Iowa rose dramatically to 69.14 percent from 30.74 percent a week ago.

Drought expanded in other important farm states over the last week as well, to 94 percent of Missouri and more than 81 percent of Illinois for at least extreme drought.

"Every day we go without significant rain ... is tightening the noose," said Mark Svoboda, a climatologist with the University of Nebraska's National Drought Mitigation Center.

Trader's Highlight

DJI- NEW YORK, Aug 9 (Reuters) - The Standard & Poor's 500 extended its rally to a fifth day on Thursday, again eking out a tiny gain as lingering expectations for economic stimulus from central banks lent support to a market lacking new catalysts.

While the S&P 500 has chalked up three-month highs every day this week, the index has climbed only 0.6 percent over the past three sessions - an indication that investors aren't prepared to make aggressive bets despite better-than-expected jobless claims and U.S. trade data.

The Nasdaq outperformed the other two major U.S. stock indexes, led by Cisco Systems Inc CSCO.O after Goldman Sachs added the company to its conviction buy list and Piper Jaffray upgraded it to "overweight." Cisco rose 3.2 percent to $17.70 and was the Dow's biggest percentage gainer.(nL4E8J9668)

The three major U.S. stock indexes seesawed throughout the morning, with the S&P 500 mostly hovering above 1,400 in light trade as investors bet central banks would soon act to support a global recovery that has shown signs of stalling.

"It's almost eerie how flat the market has been. But while there's a risk of our becoming overbought, I don't see why we'd see a decline of any magnitude until we hear what central banks will do," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The Dow Jones industrial average .DJI slipped 10.45 points, or 0.08 percent, to 13,165.19 at the close. But the Standard & Poor's 500 Index .SPX inched up 0.58 of a point, or 0.04 percent, to 1,402.80. The Nasdaq Composite Index .IXIC gained 7.39 points, or 0.25 percent, to close at 3,018.64.

Markets held on despite a raft of weak Chinese economic data. Annual growth in factory output slowed to its lowest in more than three years in July while annual consumer price inflation hit a 30-month low. (nL4E8J93OR)

"This news is disappointing, but it only emboldens investors that we'll be rescued by central banks somewhere," said Luschini, who helps oversee $54 billion in assets.

Data showed the number of Americans filing new claims for jobless benefits fell last week while the U.S. trade deficit in June was the smallest in 1-1/2 years, hopeful signs for the struggling economy. (nL2E8J92F7)

Beauty products maker Elizabeth Arden RDEN.O forecast 2013 profit above estimates on stronger sales and its shares jumped 13 percent to $44.02. (nL2E8J735Q)

Of the 445 companies in the S&P 500 that have reported second-quarter earnings through Thursday morning, 68 percent have reported earnings above analysts' expectations, in line with the average over the last four quarters.

Volume was light, with about 5.41 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.

About 52.5 percent of companies traded on the New York Stock Exchange closed higher, while 53 percent of Nasdaq-listed shares gained for the day.

NYMEX- NEW YORK, Aug 9 (Reuters) - U.S. crude futures edged up a penny on Thursday, paring gains as the potential threat to U.S. Gulf Coast energy infrastructure from Tropical Storm Ernesto faded, while the stronger dollar .DXY helped limit gains from supportive economic data.

U.S. gasoline RBc1 and heating oil HOc1 futures rose more than 2 cents, tracking higher with stronger Brent crude LCOc1 futures.

CBOT SOYBEAN-Benchmark November soybean futures SX2 on the Chicago Board of Trade rose 3 percent, their biggest rise in a month, on news of U.S. soy sales to China and positioning a day ahead of the U.S.Department of Agriculture's August supply/demand reports.

* USDA said exporters reported sales of 165,000 tonnes of U.S. soybeans to China for delivery in 2012/13. (nL2E8J92NL)

• Export traders said China may have purchased up to about half a million tonnes of U.S. soybeans for September through December shipment. The spot CIF soybean barges basis at the Gulf GRYM jumped to a three-year peak as exporters scrambled for nearby supplies.

• Bull-spreading noted in CBOT soybean futures, with nearbys gaining against back months, due to the nearby U.S. soy sales to China and expectations of continued strong demand for U.S. supplies until the next South American soy harvest starts in February.

• CBOT soymeal supported by news that a Kansas ethanol plant was suspending operations (nL2E8J976K), a move that was seen restricting supplies of dried distillers' grain, a source of protein in animal feed, and raising demand for soymeal.

• Traders await 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)

• Modest rains in portions of the Midwest this week to provide only minimal relief from drought. Rainfall this week totaled 0.25 to 1.00 inch and was scattered over about half of the Midwest, but only about 25 percent received the heavier amount. (nL2E8J9304)

• USDA reported export sales of U.S. soybeans in the latest week at 300,400 tonnes, below trade expectations for 350,000 to 450,000 tonnes.

• USDA reported weekly export sales of U.S. soymeal at 211,700 tonnes, above trade expectations, and soyoil sales at 12,900 tonnes, below expectations.

• Brazil's government kept its forecast for the now completed soybean harvest nearly unchanged at 66.4 million tonnes, compared to 66.37 million tonnes in July. (nE5E8EL040)

• CBOT once again reported no deliveries of soybeans or soymeal against August futures. But soyoil deliveries totaled 846 contracts.

FCPO- SINGAPORE, Aug 9 (Reuters) - Malaysian crude palm oil futures recovered a little on Thursday from a near 8-week low hit the previous day, although traders remained cautious ahead of a slew of key industry reports that could stir more market volatility.

The U.S. Department of Agriculture (USDA) will release its monthly supply and demand report on Friday that is likely to show a cut in estimates for new-crop soy output, potentially limiting edible oil supply and shifting some demand to palm oil.

Traders are looking out for the July stocks data from the Malaysian Palm Oil Board (MPOB), which is likely to have reached a five month high and could help shore up a deficit in global vegetable oil supply. PALM/POLL

"(Palm oil) futures are a little bit oversold so we are expecting some technical pullback. But upside potential is very limited as long as Malaysian stocks remain on the high side," said a trader with a local commodities brokerage in Malaysia.

The benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange ended 0.1 percent higher at 2,865 ringgit ($923) per tonne. Prices touched a low of 2,854 ringgit on Wednesday, a level last seen on June 15.

Total traded volumes were thin at 20,741 lots of 25 tonnes each, compared to the usual 25,000 lots.

Malaysian palm oil 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)

Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance will release exports data for the Aug 1-10 period also on Friday. PALM/ITS PALM/SGS

Palm oil exports suffered a double-digit decline in July as festival demand eased, cargo surveyor data showed. Traders are now pinning their hopes on the recently announced tax-free crude palm oil export quotas of 2 million tonnes to help reduce stocks in coming months.

The industry is also 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 9 (Reuters) - Southeast Asian stock markets ended mostly higher on Thursday, with Indonesia being led higher by banking shares and Thailand extending gains for a fourth session amid renewed appetite for refinery shares on hopes of an earnings recovery in the second half.

Jakarta's Composite Index .JKSE rose 0.99 percent, led by a 3.8 percent rise in top lender Bank Mandiri Tbk BMRI.JK. Thai SET index .SETI gained 0.3 percent as refiners, including Thai Oil TOP.BK and Esso ESSO.BK, jumped on strong volumes.

Singapore markets were closed for a public holiday.

The Philippine index .PSI slid 0.98 percent, erasing a modest gain of 0.5 percent on Wednesday as investors cashed in gains in the rallying market. It has risen 20.2 percent so far this year, and is Southeast Asia's second-best performer.

Ayala Land Inc ALI.PS, the Philippines' biggest property developer, dropped 5 percent, wiping out a three-day gain of 8.5 percent following the company's release of strong six-month net profit. (nL4E8J329B)

"There will be a shortage in terms of market-moving news, going forward, after the earnings reporting season. I guess it was a perfect time to take some profits off the table," said analyst Jose Vistan of AB Capital Securities Inc in Manila.

RTRS-Indonesia trims 2012 palm oil output forecast by 8 pct

JAKARTA, Aug 9 (Reuters) - Indonesia, the world's top palm oil producer, has lowered its earlier output forecast by 8 percent to 23.6 million tonnes this year, an agriculture ministry official said late on Thursday.

Earlier this year, the same ministry said it expected production of the edible oil to rise 14 percent to 25.7 million tonnes this year, from 22.5 million tonnes in 2011. (nL3E8C933G)

Gamal Nasir, director-general of plantation at the agriculture ministry, gave no reason for the change, at a media briefing in Jakarta.

The Indonesian Palm Oil Association expects crude palm oil output to increase 6 percent to 25 million tonnes in 2012 due to rising plantation areas.(nL3E8C43TJ)

Rising demand for palm oil - used in cosmetics, cookies and ice cream - has led to deforestation that has prompted an Indonesian moratorium on new permits to clear forests from May last year. (nL3E7GQ05F)

Nasir also said output of cocoa beans in the world's No. 3 producer, would be 833,310 tonnes this year, versus January's forecast at 1.3 million tonnes and 712,230 tonnes in 2011.

At the time of the government's January predictions, analysts were sceptical that cocoa output in Indonesia would rise above 1 million tonnes and said the figure would later be revised downwards.

The country is battling disease and adverse weather conditions, which have hampered the country's cocoa supplies in recent years.

Last month, a survey showed that the government's $350 million government programme aimed at reviving Indonesia's cocoa industry had suffered a serious setback after most newly planted trees died. (nL3E8IA3ZL)

Indonesian rubber output for this year will be 3.27 million tonnes versus an early forecast at 2.7 million tonnes, and coffee production is seen at 748,110 tonnes from 718,000 tonnes and 633,990 tonnes in 2011, Nasir added.

In June, the Indonesian Rubber Association (Gapkindo) said output in the world's second-biggest producer would slip by as much as 10 percent to about 2.65 million tonnes this year.

Dry weather and falling global prices, were cited for the fall by Gapkindo. (nL3E8HP1PL)

Indonesia is considering investing $526 million over three years to boost and improve output in its rubber trees, starting in 2013. (nL4E8IJ338)

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

RTRS- Bangladesh to tender for 20,000 T of palm oil to stabilise market

DHAKA, Aug 7 (Reuters) - State buyer Trading Corporation of Bangladesh will import 20,000 tonnes of refined palm olein annually through an international tender, in an attempt to keep domestic prices more stable, its chairman said on Tuesday.

"We will seek the entire quantity in a single tender and receive 5,000 tonnes of refined oil every three months from the winning bidder,” Sarwar Jahan Talukder said.

“It will ensure a normal flow of edible oil throughout the year,” he said.

Successive governments have been struggling to control prices of edible oil amid widespread accusations that big players often create artificial shortages to make windfall profits.

Analysts said the volume of the latest tender would not be enough to control the market.

“It’s good that the government is finally taking an initiative, though the initial impact will be nominal,” said Fakhrul Alam, Malaysian Palm Oil Council’s regional manager for Bangladesh, Nepal and Myanmar.

“The purpose will be achieved only if the government gradually increases the import volume and holds a substantial quantity in reserve.” he told Reuters.

Bangladesh is almost entirely dependent on imports of crude and refined palm and soybean oil to meet domestic demand of nearly 1.5 million tonnes.

It imports 1 million tonnes of palm oil, 400,000 tonnes of soybean oil, 150,000 tonnes of rapeseed and 100,000 tonnes of soybean seed annually.

RTRS- Wetter outlook for drought-struck US Midwest

CHICAGO, Aug 7 (Reuters) - Midday forecasts were for wetter weather in the U.S. Midwest this week which will help the late planted soybean crop but arrive too late to be of benefit to the drought-stressed corn crop, an agricultural meteorologist said.

Outlooks for Wednesday and Thursday were for 0.50 to 1.00 inch (1.3 to 2.5 cm) with locally heavier amounts in Missouri, west central Illinois, western and southern Iowa and southern South Dakota.

"Previously we were expecting 0.20 inch to 0.75 inch," said Andy Karst, meteorologist for World Weather Inc.

Karst also said there were now outlooks for up to 1.00 or 2.00 inches of rain Thursday and Friday for northern Indiana, southern Michigan, Ohio and Kentucky compared with the previous outlook for only 0.50 inch.

MDA EarthSat Weather meteorologist Don Keeney agreed the central and eastern Midwest should receive rain on Thursday and Friday, and high temperatures will be in the 80s degrees Fahrenheit (26-32 degrees Celsius), rather than the 90s F.

"Temperatures will be cooler late this week, a high of only 77 F in Chicago by Friday but there's a return to heat next week," Keeney said.

Keeney said some of the late-planted U.S. soybean crop would benefit from the late summer turn to damper weather but the lion's share of the U.S. corn crop has already been affected by the worst drought in 56 years.

Corn and soybean prices were driven to record highs in late July as the drought worsened, trimming crop production. Prices for each eased on Monday but by Tuesday the market was turning higher again on concerns about more crop losses.

Relentless heat and drought has slashed prospects for the U.S. corn crop to a five-year low and the supply of corn next year was expected to fall to its lowest 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 crop weather in a broad swath of the Midwest while corn conditions declined another one percentage point. However, the ratings for each remained the worst since 1988 as the heat and dryness took a huge bite out of crop prospects.

RTRS- Soy futures' downside potential limited- Oil World

HAMBURG, Aug 7 (Reuters) - Tight global supplies mean soybean futures contracts have limited potential to fall up to January 2013 although they could face temporary selling pressure after touching record levels, Hamburg-based oilseeds analysts Oil World said on Tuesday.

“Soybean futures are vulnerable to another setback on further fund selling,” it said. “However the downward potential is limited for the contracts up to Dec. 2012/Jan. 2013 in view of the prospective severe tightness of global supplies of soybeans and soymeal in Sep. 2012/Febr. 2013.”

Soybean prices hit record highs in late July as severe drought and a heatwave scorched U.S. crops following drought-damage to Brazilian and Argentine crops earlier this year. GRA/ (nL2E8J3CKY)

Soybeans have fallen from their peaks after rain in the U.S. Midwest brought mild relief to the crop, but this Friday's supply-demand report from the U.S. Department of Agriculture is widely expected to slash the U.S. government's estimates of this year's U.S. corn and soybean crops. (nL2E8J3CKY) (nL2E8J3CKY)

There is great uncertainty about the level of damage to the U.S. soybean crop but several estimates indicate that there will not be enough soybeans to meet global demand, Oil World said.

“Severe demand rationing will be required, considering the sharply-reduced South American soybean stocks currently available and the prospective unusually-small U.S. soybean stocks of or below 4.3 million tonnes as of end-August 2012,” it said.

Oil World forecasts the smaller crops mean global soybean crushings will be reduced by at least 3-4 million tonnes from a year ago in Sept. 2012/Feb. 2013, even if soybean stocks are reduced steeply in the U.S. and other countries ahead of the arrival of next year’s South American soybean crops.

This will in turn cut output of the key animal feed soymeal and support soymeal prices.

“The global tightness will be much more severe in soymeal than in soyoil during Sept. 2012/Feb. 2013,” it said.

RTRS- Latam soybean stocks in staggering fall- Oil World

HAMBURG, Aug 7 (Reuters) - Soybean stocks in the leading South American producers have dropped by about a third against this time in 2011 after poor harvests and brisk exports, shifting global soybean demand to the United States at a time of concern the U.S. crop will also fall, Hamburg-based oilseeds analysts Oil World said on Tuesday.

“At the beginning of August, combined soybean stocks in Argentina, Brazil, Paraguay and Uruguay had plummeted to only an estimated 45.4 million tonnes, a staggering 22.5 million tonnes or one-third below a year earlier,” Oil World said.

“Soybean crushers are reportedly facing increasing difficulties in acquiring soybeans considering that a large portion of the physically available stocks is already committed.”

The United States is the world’s largest soybean exporter, followed in second place by Brazil, then by Argentina and Paraguay. Drought cut soybean harvests in South America this year while another drought and heatwave is also threatening the U.S. crop. (nL2E8J1F9L)

Oil World estimates Brazil’s Aug. 1 soybean stocks fell to 20.80 million tonnes from 33.15 million tonnes on Aug. 1, 2011. It believes Argentina’s stocks fell to 22.66 million tonnes from 30.62 million tonnes and Paraguay’s to 1.75 million tonnes from 3.88 million tonnes.

Instead of meeting global soybean demand, Brazil may have been importing soybeans itself recently, it said.

“There was talk recently that Brazilian crushers are considering purchasing soybeans from neighbouring countries,” Oil World said. “An estimated 0.2 million tonnes was apparently purchased from Bolivia, but we consider it unlikely that any noticeable quantity will be imported from Argentina and/or Paraguay where soybean supplies are currently unusually tight too.”

Brazilian and Argentine soybean exports were above expectations in June and July, it said. But they will have to drop in the remaining months of the year as supplies dwindle.

The “prospective sharp decline in South American exports is boosting foreign demand for U.S. origin to levels the United States is unlikely to satisfy, owing to the recent significant soybean crop deterioration,” Oil World added.

This is a major reason why soybean prices reached all-time highs in July, it said. GRA/

RTRS- US soy stocks seen matching 32-year low on drought

CHICAGO, Aug 7 (Reuters) - The worst drought to hit the U.S. Midwest in half a century could push domestic soybean inventories to match their lowest level in at least 32 years, analysts said ahead of a hotly anticipated monthly report from the U.S. Department of Agriculture.

There is still time for late summer rains to bolster supplies, however, or for record-high prices to curtail demand and help maintain soy reserves.

The USDA is scheduled to release its August supply/demand report on Friday, the first monthly report of the year to include yield data from field samples.

Ahead of the report, the average estimate for U.S. soybean ending stocks for the 2012/13 "new crop" marketing year among analysts surveyed by Reuters was 112 million bushels. That would match the stocks total from 2003/04, the lowest in USDA records dating back to 1980/81.

The USDA in July projected 2012/13 soybean ending stocks at 130 million bushels. Eleven of 17 analysts surveyed predicted the USDA would lower its forecast, while four expected no change. Two reckoned there would be an increase, saying the supply squeeze would drive Chicago Board of Trade soybean prices high enough to cut demand.

Front-month CBOT soybeans Sc1 touched an all-time high of $17.77-3/4 per bushel on July 20. The United States is the largest producer of soybeans, which are crushed into soybean meal, a key source of protein in livestock and poultry feed, and soyoil, which is used in foods and biofuels.

"We are going to reach a point where people are not going to be willing to pay up for the beans or meal," said Sterling Smith, commodity strategist for Citigroup in Chicago, who pegged 2012/13 soy stocks at 140 million bushels.

"We are beginning to see people taking their turkeys to market. They are taking livestock to market. They are culling the herds," Smith said.

At the CBOT on Tuesday, benchmark November soybeans SX2 were up 10-3/4 cents at $15.95 per bushel by 9:05 a.m. CDT (1405 GMT), but down 6 percent from a life-of-contract high of $16.91-1/2, set July 23.

NEW-CROP SUPPLIES STILL IN QUESTION

Analysts were unanimous in their expectations that this summer's drought would prompt the USDA to lower its forecasts for 2012 soybean yield and production. The average trade estimate for soy production was 2.817 billion bushels, which would be a five-year low. The average yield estimate was for 37.753 bushels per acre, a nine-year trough.

The USDA in July projected soy production at 3.050 billion bushels, with an average yield of 40.5 bushels per acre.

Also, nearly all the analysts expected the USDA to reduce its forecast of harvested acres. The average trade estimate was for 74.8 million acres (30.3 million hectares), down half a million from the USDA's July forecast of 75.3 million acres.

In the last 10 years, the department has cut its forecast of harvested soy acreage from July to August three times and raised it two times. In 1988, another year of major drought, it cut the outlook for the soy harvested area by 400,000 acres in its August report.

One complication in estimating the crop size in August is that soybeans in some areas are still setting pods, a key factor in determining yield. Much-needed rains fell in parts of the U.S. Midwest last weekend, a factor that pressured soybean futures on Monday on the Chicago Board of Trade as traders mulled improved crop prospects.

"With this rainfall we just received, I think it's going to go a long way in helping the beans. Maybe you can get another half a bushel out of the yield," said Jason Ward with Northstar Commodities in Minneapolis.

Forecasts on Tuesday called for showers and cooler temperatures in parts of the drought-stricken U.S. Midwest this week, but hotter and drier weather was likely by next week. (nL2E8J723S)

Others noted that the soybean crop is developing well ahead of normal, however, a factor that may limit its ability to rebound. The USDA on Monday said 71 percent of the crop had reached the pod-setting phase by Aug. 5, compared with the five-year average of 53 percent. US/SOY

"OLD-CROP" ENDING STOCKS SEEN TIGHTENING

Along with the size of the harvest, another variable in the new-crop supply is the amount of "old crop" ending stocks carried in from the 2011/12 marketing year, which ends Sept. 1, 2012. The average trade estimate for 2011/12 soy stocks was 158 million bushels, down from the USDA's July forecast of 170 million.

Some analysts cited strong export demand for 2011/12 U.S. soybeans, especially from top buyer China, after a drought slashed South America's soy harvest.

"The old-crop demand has been better than people thought. You have not seen China quit buying those old-crop beans," said Ward.

Anne Frick with Jefferies Bache in New York expected the USDA to raise its forecast of the amount of soybeans crushed by domestic soy processors. Frick said the USDA's 2011/12 crush estimate of 1.675 billion bushels looks too small given monthly soy crushing statistics.

"I think they could go up more than 20 million (bushels) on the crush, but I don't think they will," Frick said.

As for global supplies, traders expected the USDA to lower its forecasts for both 2011/12 and 2012/13 world soybean ending stocks. But analysts still anticipate 2012/13 soy inventories rising compared to 2011/12 as South American farmers are expected to sow large crops later this year.

"Everyone is going to watch Brazilian planting when that starts in three or four weeks," said Smith. "If they have any problems down there, this market will go bonkers."

Trader's Highlight

DJI- NEW YORK, Aug 7 (Reuters) - U.S. stocks rose for a third straight day on Tuesday, pushing the S&P above 1,400 for the first time since early May, on growing optimism the European Central Bank would act soon to contain the euro zone's debt crisis.

Trading was light, which could distort the level of optimism investors truly have that Europe will follow through with adequate measures. ECB President Mario Draghi boosted hopes last week when he spoke of restoring calm to the euro zone's troubled bond markets.

Since then, good news from Greece and declines in borrowing costs for Spain and Italy from peaks above 7 percent have kept sentiment positive. The relative calm allowed the S&P to break through the psychologically important 1,400 level after trying unsuccessfully the past couple of sessions.

"If the ECB expands its balance sheet, it will keep pushing these bond yields lower, which can help these countries finance their debt, giving markets a bit of reprieve," said Joseph Tanious, global market strategist at J.P. Morgan Funds in New York. "It's likely we won't get anything official for a few weeks, and until then investors are likely to be skittish."

Summer holidays have added to light trading volume, which has contributed to volatility. Equities cut their gains just before the close on Tuesday, mirroring Monday's late-day action.

About 6.39 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.

The real tests for markets may come in September. The ECB is expected to face decisions about controlling the euro zone debt crisis and the Federal Reserve could take stimulus actions to aid the flagging U.S. economic recovery.

The Dow Jones industrial average .DJI rose 51.09 points, or 0.39 percent, at 13,168.60. The Standard & Poor's 500 Index .SPX was up 7.12 points, or 0.51 percent, at 1,401.35. The Nasdaq Composite Index .IXIC was up 25.95 points, or 0.87 percent, at 3,015.86.

Despite worries over the economies of Europe and the United States, investors have pushed the S&P 500 up more than 11 percent so far this year. Yield-hungry investors have kept buying stocks as U.S. and German government bond prices soar and yields hit historic lows.

Tuesday's advance was led by stocks in cyclical sectors like energy, materials and consumer discretionary, while defensive sectors like telecoms and utilities edged lower.

"Despite what seems like a weekly scandal of some sort, the banks have posted incredibly large profits. The Fed has made it very easy for them to take on very little risk and make very large profits," said Randy Frederick, managing director of active trading and derivatives for Charles Schwab in Austin, Texas.

With 82 percent of S&P companies having reported quarterly results, 68 percent have beaten profit expectations, according to Thomson Reuters data.

Pfizer PFE.N and Johnson & Johnson JNJ.N scrapped further studies of an experimental drug for Alzheimer's disease after the drug failed in a second trial. U.S.-traded shares of their partner, Elan Corp ELN.N, dropped 0.9 percent to $11.15. Pfizer fell 2.1 percent to $23.74 and J&J edged 0.8 percent lower to $68.29. (nL2E8J6DQ5)

A group of investors rescued Knight Capital Group KCG.N in a $400 million deal that kept the market maker in business, but existing shareholders were nearly wiped out. Knight closed 0.3 percent lower at $3.06, erasing gains of more than 3 percent from earlier in the session. (nL2E8J60KK)

About 62 percent of stocks on the New York Stock Exchange closed higher while 61 percent of Nasdaq-listed stocks finished up.

NYMEX- NEW YORK, Aug 7 (Reuters) - U.S. crude oil futures rose for a third day in a row on Tuesday, posting the highest settlement in 12 weeks, on hopes for more U.S. Federal Reserve economic stimulus, record low North Sea output seen likely in September and Middle East tensions.

CBOT SOYBEAN- Soybean futures on the Chicago Board of Trade fell for a second day on forecasts for improved crop weather in the U.S. Midwest and profit-taking ahead of a major U.S. government crop report on Friday, traders said.

* Updated midday forecasts called for wetter weather in the U.S. Midwest this week, which should help late-planted soybeans but arrive too late for most of the drought-stressed corn crop - meteorologist. (nL2E8J72GA)

• Trade was thin, with daily volume in soybean futures about 20 percent below the prior 250-day average.

• Traders awaiting 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)

• Soybean stocks in the leading South American producers have dropped by about a third since one year ago, shifting global demand to the United States at a time of concern the U.S. soy crop will also fall - analysts Oil World. (nL6E8J77IE)

• Tight global supplies mean soybean futures contracts have limited potential to fall up to January 2013 although they could face temporary selling pressure after touching record levels - Oil World. (nL6E8J6AY9)

• USDA late Monday said 29 percent of the U.S. soybean crop was rated in good to excellent condition, unchanged from the previous week -- halting a string of six weeks of decline. US/SOY

• CBOT reported no deliveries against August soybean or soymeal futures, while soyoil deliveries totaled 1,155 contracts.

FCPO- SINGAPORE, Aug 7 (Reuters) - Malaysian crude palm oil touched its lowest in more than a week on Tuesday, as traders priced in wetter weather in the U.S. Midwest that eased concerns about further damage to new-crop oilseed supplies.

Investors also avoided taking risky positions ahead of key reports later in the week. Industry regulator Malaysian Palm Oil Board (MPOB) will release official stocks and output data on Friday, and traders expect a recovery in stocks after a 14-month low in June.

A monthly supply and demand report due later this week from the U.S. Department of Agriculture (USDA) could also provide some clues on soybean production trends and the extent of drought damage.

"The market is exercising caution here ahead of MPOB and USDA data," said a dealer with a foreign commodities brokerage in Malaysia.

"The crop rating was rather neutral despite some rains reported over the weekend," he added, referring to the unchanged weekly soybean crop condition rated by the USDA. (nL2E8J635O)

The benchmark October palm oil futures FCPOc3 on the Bursa Malaysia Derivatives Exchange closed 0.4 percent lower at 2,907 ringgit ($938) per tonne. Prices earlier touched a low at 2,897 ringgit, a level last seen on July 27.

Total traded volume came in at 23,574 lots of 25 tonnes each, fewer than the usual 25,000 lots.

The supply-demand report from the USDA later this week could offer more clues for traders on the extent of soy crop damage from the worst drought in 56 years.

A lower quality of soybean crop, leading to a smaller supply of soybean oil, could shift more vegetable oil demand to the cheaper palm oil.

Market participants are also looking out for the Malaysian palm oil export figures for the Aug 1-10 period.

Exports in July suffered a double-digit monthly decline and could lead to higher stocks especially on the back of higher production for the month. PALM/ITS PALM/SGS

REGIONAL EQUITY- Aug 7 (Reuters) - Most Southeast Asian stock markets eased on Tuesday with Singapore falling from a one-year high, but foreign investors bought into equities in Indonesia and Malaysia amid hopes that Europe will take further action to tackle its debt crisis helped sentiment.

Singapore's Straits Times Index .FTSTI fell 0.1 percent from a one-year high as property developer CapitaLand Ltd CATL.SI came off 2.2 percent after its chief executive sold one million shares. (nL4E8J71ID)

Jakarta Composite Index .JKSE lost 0.5 percent and Malaysia .KLSE ended 0.5 percent weaker from its near three-week high, both in strong volumes.

Despite losses, Indonesia saw foreign inflow of $12.7 million, while Kuala Lumpur enjoyed a net foreign buying of $5.93 million.

Thailand .SETI, bucking the trend ended steady.