Trader's highlight

DJI - NEW YORK, Dec 24 (Reuters) - U.S. stocks edged lower on Monday as caution over the potential for volatility driven by worries about the U.S. "fiscal cliff" dampened enthusiasm at the start of a seasonally strong period for equities.

Investors are betting Congress will reach a deal to avert most of the austerity measures due to come into force at the start of next year. That has led to the best year for stocks since the post-financial crisis rebound. But those gains may be quickly reversed if a deal is not reached soon.

The S&P 500 index posted its biggest drop in more than a month on Friday as a Republican plan to avoid the cliff - $600 billion in tax hikes and spending cuts that could tip the U.S. economy into recession - failed to gain traction on Thursday night.

Sharp moves like that highlight how headlines from Washington can whipsaw markets, especially during the thinly traded period over the Christmas holiday.

Still, with the S&P 500 up 0.7 percent in December and on course for its strongest month since September, some analysts are predicting that stocks will find their footing during a market seasonality known as the "Santa Claus rally."

"Right now we've seen some very constructive action in the market so I think that bodes well for this being a positive seasonal 'Santa' period over the coming seven days," said Ari Wald, a technical analyst at The PrinceRidge Group.

He noted an all-time high in the NYSE advance-decline line, which compares advancing and declining stocks, as indication of strong participation in the rally off November lows.

"Pull-backs are buying opportunities," said Wald. "There has been really great participation on this move, a lot of small- and mid-cap stocks behaving well, pushing out to the upside; we're seeing some good leadership from offensive sectors of the market as well."

A high ratio of advancing stocks to declining issues shows there is broad participation across the equity market.

The Santa seasonality covers the last five trading days of the year and the first two of the new year. Since 1928, the S&P 500 has averaged a gain of 1.8 percent during this period and risen 79 percent of the time, according to data from PrinceRidge.

The Dow Jones industrial average dropped 51.76 points, or 0.39 percent, to 13,139.08. The Standard & Poor's 500 Index fell 3.49 points, or 0.24 percent, to 1,426.66. The Nasdaq Composite Index  lost 8.41 points, or 0.28 percent, to 3,012.60.

The S&P 500 is up more than 13 percent for the year, having recovered nearly all the losses suffered in the wake of the U.S. election. The yearly gain would be the best since 2009.

Some U.S. lawmakers expressed concern on Sunday the country would go over the cliff, as some Republicans charged that was President Barack Obama's goal. Talks are stalled with Obama and House of Representatives Speaker John Boehner out of Washington for the holidays.

"It does seem like we are continuing through the same drift of the same thing we’ve had the past couple of weeks - 'cliff' talk," said Nick Scheumann, wealth partner at Hefty Wealth Partners in Auburn, Indiana.

"You can’t trade on what you don’t know and we truly don’t know what they are going to do," he said.

Congress is expected to return to Washington next Thursday as President Barack Obama returns from a trip to Hawaii. As the deadline draws closer, a 'stop-gap' deal appears to be the most likely outcome of any talks.

Trading volume was muted, with U.S. equity markets closing at 1 p.m. (1800 GMT) ahead of the Christmas Day holiday on Tuesday.

U.S. retailers may not see a sales surge from this weekend as ho-hum discounts and fears about imminent tax hikes and cuts in government spending give Americans fewer reasons to open their wallets in the last few days before Christmas.

NYMEX - NEW YORK, Dec 24 (Reuters) - U.S. crude futures edged lower on Monday in thin, pre-holiday trade as oil prices came under pressure from concerns about the lack of a U.S. budget agreement to avert tax hikes and spending cuts that could slow the economy and curb demand for petroleum.

CBOT Soyoil - Dec 24 (Reuters) - Soybean futures on the Chicago Board of Trade rose for a second trading day Monday in a holiday-shortened session, rebounding from last week's one-month low on technical buying and short-covering, traders said.

• U.S. markets will be closed on Tuesday in observance of the Christmas holiday, with electronic and open-outcry trade set to resume Wednesday at 9:30 a.m.
• USDA delayed the release of its weekly report on U.S. grain export inspections until Wednesday.
• Cash values for soybeans were mostly unchanged at the U.S. Gulf and in the Midwest interior ahead of the holiday. Farmers have delayed sales after CBOT corn futures slumped to a six-month low and soy to a one-month low last week.
• China's Shanghai and Dalian commodity futures exchanges will temporarily raise trading margins for all contracts from Dec. 28 ahead of a three-day New Year holiday. All margin requirements will return to normal levels after the holiday if the contracts do not hit circuit breakers on Jan. 4 when trading resumes.
• Large speculators expanded their net long position in CBOT soybeans to 93,168 lots in the week ended Dec. 18, the largest net long in five weeks, weekly data from the U.S. CFTC showed Friday.

FCPO - KUALA LUMPUR, Dec 24 (Reuters) - Malaysian palm oil futures climbed to a near one-month high on Monday as investors pinned hopes on next year's tight supply of competing soyoil shifting food demand to the tropical oil.

Record palm oil stocks in Malaysia, the world's No.2 producer, and slowing global demand has weighed on the market that has fallen 23 percent this year.

Palm oil has widened its discount to soyoil, potentially drawing in more demand from big Asian consumers like India next year as soy-exporting South American faces tighter supply from adverse weather.

"For Q1 2013 we anticipate soybean supply to be tight albeit China cancelling, so that deficit can only be covered by palm oil," said a trader with a local commodities brokerage.

"South America must produce and if they fail, then attention will turn to palm oil," the trader added.

The benchmark March contract on the Bursa Malaysia Derivatives Exchange rose 1 percent to close at 2,431 ringgit ($794) per tonne. Prices earlier climbed to 2,437 ringgit per tonne, the highest level since Nov. 27.

Total traded volumes stood at 18,637 lots of 25 tonnes each, much lower than the usual 25,000 lots ahead of Christmas holidays.

Seasonally slowing output and a growing biodiesel demand from Europe could help prop up palm oil prices in the first quarter of next year.

"From a fundamental point of view, palm should be supported by yield getting thinner and also emerging demand not only from the usual suspects, but Europe as well," said Standard Chartered analyst Abah Ofon in Singapore.

"On one hand European refiners are looking to buy crude palm oil because of the good discount between gasoil. That's making crude palm oil attractive as a feedstock for biodiesel," Ofon added.

Brent crude fell for a third day on Monday, trading below $109 a barrel, as uncertainty over the ability of the United States to resolve a budget crisis before a year-end deadline stoked concerns about demand growth in the world's top oil consumer.

In other competing vegetable oil markets, U.S. soyoil for January delivery fell 0.1 percent in late Asian trade after earlier gains on bargain hunting as prices slid on China's record cancellation.

Last Friday, China cancelled 540,000 tonnes of U.S. soybeans --the biggest cancellation by the world's top importer of the oilseed in at least 14 years -- as it expects to book cheaper supplies from Brazil next year.

Regional Equities - BANGKOK, Dec 25 (Reuters) - Vietnam's main share index rose for a second day to a three-month high on Tuesday, led higher by financial stocks, while Thailand's SET index eked out slim gains as domestic institutions led buyers.

In a rangebound session, Vietnam ended at 401.34, the highest since Sept. 17, and Thailand was up 0.14 percent by 0922 GMT. The Thai index has risen 34.3 percent so far this year, Southeast Asia's best performer.

The Thai bourse expects a number of companies to list on the main SET bourse and the smaller Market for Alternative Investment next year, worth about 120 billion baht ($3.92 billion) in initial public offerings (IPOs), president Charamporn Jotikasthira said.

The two bourses saw about 113 billion baht worth of IPOs in 2012, he said.

Among actively traded stocks on Tuesday, Vietnam Joint Stock Commercial Bank for Industry and Trade  gained 3.7 percent in trading volume of 3.2 times the monthly average, while Thai telecoms group Shin Corp Pcl rose 0.7 percent.

Singapore , Malaysia , Indonesia and the Philippines were closed on Tuesday for the Christmas holiday, reopening on Wednesday.

RTRS - Snow storm makes small dent in drought-stricken U.S. crop region

CHICAGO, Dec 21 (Reuters) - The first major snow storm of winter did little to ease the worst drought in more than 50 years in the crop growing U.S. Central Plains and Midwest, while snarling traffic and hampering feeding and transportation of livestock.

MDA EarthSat Weather meteorologist Kyle Tapley said six to 12 inches or more snow fell from Nebraska into Wisconsin during the past two days, the equivalent of about 0.50 inch to 1.00 inch of rain, that will help ease but not eliminate drought worries.

Tapley said roughly 10 inches of moisture or rainfall would be needed in a large portion of the Plains and Midwest to break the drought of 2012 that trimmed crop production and sapped soil moisture reserves.

"The snow put a small dent in the drought and I don't see any moisture for next week," Tapley said.

Commodity Weather Group (CWG) said the snow favored Wisconsin, far eastern Iowa, far northwestern Illinois and west-central Michigan on Thursday with better than a foot of snow in Wisconsin.

"Another storm over the weekend into early next week will bring rain to the Delta and Southeast and a chance for snow near the Ohio River Valley," said CWG meteorologist Joel Widenor.

Widenor said prospects for more rain or snow in the southern Plains hard red winter wheat producing states were more limited on Friday.

But there could be some light rain or snow in the area on Tuesday but "this would provide only limited additional drought relief," Widenor said.

Winterkill threats for wheat and frost threats for Florida citrus are still limited, despite cooling the next two weeks, according to CWG's advisory on Friday.

Trader's highlight

DJI - NEW YORK, Dec 21 (Reuters) - U.S. stocks finished lower on Friday after a Republican plan to avoid the "fiscal cliff" failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013.

Still, stocks managed to rebound from the day's lows near the end of the session, and for the week, the three major U.S. stock indexes still ended higher, with the S&P 500 gaining 1.2 percent.

Trading was volatile because of waning confidence in the prospect of a deal out of Washington, and in part, as the result of the quarterly expiration of options and futures contracts. The CBOE Volatility Index or VIX, the market's favorite barometer of investor anxiety, finished below its session high.

Republican House Speaker John Boehner failed to garner enough votes from even his own party to pass his "Plan B" tax bill late on Thursday. It was the latest setback in negotiations to avoid $600 billion in tax hikes and spending cuts that some say could tip the U.S. economy into recession.

"The failure with Plan B was disappointing, if not terribly surprising, but now there’s a real lack of clarity about what will happen, and markets hate that," said Mike Hennessy, managing director of investments for Morgan Creek in Chapel Hill, North Carolina.

The Dow Jones industrial average  dropped 120.88 points, or 0.91 percent, to 13,190.84 at the close. The Standard & Poor's 500 Index  fell 13.54 points, or 0.94 percent, to 1,430.15. The Nasdaq Composite Index  lost 29.38 points, or 0.96 percent, to 3,021.01.

"Amazingly, this sharp decline today may not actually change the technical picture much - unless the decline gets worse," said Larry McMillan, president of options research firm McMillan Analysis Corp, in a research note.

For the week, the Dow gained 0.4 percent and the Nasdaq climbed 1.7 percent.

On Friday, Herbalife  dropped for an eighth straight session. Investor Bill Ackman recently ramped up his campaign against the company. The stock skidded 19.2 percent to $27.27 and has lost more than 35 percent this week.

Plan B, which called for tax increases on those who earn $1 million or more a year, was not going to pass the Democratic-led Senate or win acceptance from the White House anyway. But it exposed the reality that it will be difficult to get Republican support for the more expansive tax increases that President Barack Obama has urged.

Still, the declines of about 1 percent in the three major U.S. stock indexes suggest that investors do not believe the economy will be unduly damaged by the absence of a deal, said Mark Lehmann, president of JMP Securities, in San Francisco.

"You could have easily woken up today and seen the market down 300 or 400 points, and everyone would have said, 'That's telling you this is really dire,'" Lehmann said.

"I think if you get into mid-January and (the talks) keep going like this, you get worried, but I don't think we're going to get there."Volatility on Friday was exacerbated in part by "quadruple witching," the quarterly expiration of stock index futures and options, stock options and single stock futures contracts.

About 8.59 billion shares changed hands on major U.S. exchanges, more than the daily average of 6.47 billion daily in 2012, in part because of the "quadruple witching" expiration.

The day's round of data indicated the economy was surprisingly resilient in November; consumer spending rose by the most in three years and a gauge of business investment jumped.

NYMEX - NEW YORK, Dec 21 (Reuters) - U.S. crude futures fell more than 1 percent on Friday as faltering efforts to negotiate a U.S. budget reinforced fears a deal would not get done to avoid mandated tax hikes and spending cuts that could curb the economy and demand for petroleum.

CBOT - Chicago Board of Trade soybean futures were higher on bargain buying following the nearly 5 percent price tumble over the past week, traders said.

* USDA said on Friday that a 110,000 tonne soybean sale to unknown destinations for 2012/13 delivery that was announced on Tuesday was incorrect. The agency said it was a domestic sale, not an export sale.

·         Spot basis bids for soybeans held mostly steady in the Midwest on Friday as snowfall and winds reduced the already slow pace of deliveries of the crop to market, grain merchants said.

·         The first major snowstorm of winter did little to ease the worst drought in more than 50 years in the crop growing central U.S. Plains and Midwest, while snarling traffic and hampering feeding and transportation of livestock.  

·         Key resistance for the March contract is at its 200-day moving average of $14.74-1/2. The nine-day relative strength index is at 40.

FCPO - SINGAPORE, Dec 21 (Reuters) - Malaysian palm oil futures touched a more-than-three-week high on Friday, posting their first weekly gain in five weeks as traders sought to cover short positions amid optimism for a zero export tax on crude palm oil in early 2013 to cut stocks.

Palm oil posted a 5.9 percent gain on the week, its best performance this year, after the edible oil suffered four straight weeks of losses on record high stocks.

"There's a technical break above the resistance level at 2,381 ringgit per tonne, and prices should remain supported above the 2,370 ringgit level," said a dealer with a foreign commodities brokerage in Malaysia. "One factor could be the pre-weekend short cover."

At the close, the benchmark March contract  on the Bursa Malaysia Derivatives Exchange was up 3.8 percent to settle at 2,409 ringgit ($788) per tonne, just off a high at 2,410 ringgit, a level last seen on Nov. 28.

Total traded volumes stood at 33,240 lots of 25 tonnes each, higher than the usual 25,000 lots.

Technical analysis showed palm oil is expected to test resistance at 2,381 ringgit per tonne and a bullish target at 2,419 ringgit has been established, Reuters market analyst Wang Tao said.

A small surprise increase in Malaysia's palm exports for the first 20 days of the month also injected cheer in the market, with cargo surveyor Societe Generale de Surveillance reporting a slight increase of 0.5 percent in shipments for the period from a month ago.

A jump in crude palm oil exports during the period, which shows companies are pushing out exports ahead of the year-end expiry of their duty-free quota, could help ease record-high stocks in the No.2 palm producer.

Analysts, however, cautioned against an overly optimistic view on inventory levels, citing lower demand from the northern hemisphere, where the edible oil tends to solidify in winter.

"Hence, despite the expected December month-on-month production decline of 12 percent, inventory should stay persistently high at above 2.5 million tonnes," Alan Lim Seong Chun, an analyst with Malaysia's Kenanga Investment Bank, said in a research note.

"Looking ahead to first quarter 2013, we expect the inventory to decline only marginally and to stay above 2 million tonnes and limit the price upside to below 3,000 ringgit."

Brent crude fell below $110 a barrel on Friday after talks in the United States to avert a budget crisis stalled, reviving worries about demand in the world's biggest oil consumer.

Palm oil prices were also supported by gains in competing vegetable oil markets. U.S. soyoil for January delivery gained 1.8 percent in late Asian trade. The most active May 2013 soybean oil contract  on the Dalian Commodity Exchange closed 0.6 percent higher.

Regional Equties - BANGKOK, Dec 21 (Reuters) - Philippine stocks ended higher on Friday, resuming a gain on the week, as investors built up positions in blue chips like banks amid ratings upgrade hopes, while other overbought markets retreated as concerns about U.S. fiscal cliff prompted selling.

The Philippine index  rose for a fourth session, adding 0.5 percent and was up 2.1 percent on the week, reversing last week's 1.5 percent loss. It ended at 5,823.94, slightly off the previous record close of 5,831.50 set on Dec. 11.

Shares in Metropolitan Bank & Trust Co , the second biggest lender by assets, advanced 2.1 percent, extending gains for a third session, after Moody's changed Philippine banking system outlook to positive

Vietnam fell 0.7 percent after a two-day rally that had taken it into overbought territory. Its 14-day relative strength index (RSI) eased to 64.8 on Friday from Thursday's 72.46, above the threshold 70 that indicates an overbought market.

Singapore , Malaysia  and Thailand also traded in overbought conditions, pulled lower.

Foreign investors turned net sellers on Friday for a net 48 million ringgit ($15.71 million) after three days of buying for a combined 161 million ringgit ($53 million), the Malaysian bourse said.

Indonesia  was down 0.1 percent, the fourth session of falls. With a weekly loss of 1.4 percent, it was the region's worst performer.

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Trader's highlight

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



RTRS - Jan palm oil imports seen at record high - industry official

MUMBAI, Dec 20 (Reuters) - India’s palm oil imports in January are likely to rise to a record high after Malaysia, the world's No. 2 palm oil producer, fixed its crude palm oil (CPO) export tax for the month at zero percent, a senior Indian industry official said on Thursday.

Malaysia earlier this week fixed zero percent duty on CPO exports as it aims to trim record high inventory that is putting pressure on prices.

"Malaysian exporters will take full advantage of zero tax to ship as much CPO as possible in January 2013 to reduce their huge stocks of over 2.5 million tonnes," said Vijay Data, president of industry body the Solvent Extractors' Association of India, in a statement.

"India being a large importer, shall become a dumping ground for CPO and we would not be surprised to see record import."

India, the world’s biggest edible oil importer, meets more than half of its edible oil needs through imports, which largely constitute palm oil.

Trader's highlight

DJI - NEW YORK, Dec 19 (Reuters) - U.S. stocks sold off late in the day to close at session lows on Wednesday as talks to avert a year-end fiscal crisis turned sour, even as investors still expect a deal.

The S&P 500 slipped after a two-day rally that took the benchmark index to its highest close in two months. Defensive-oriented shares led the decliners, including health care and consumer staples.

General Motors bucked the overall weakness to surge 6.6 percent to $27.18 after the automaker said it will buy back 200 million of its shares from the U.S. Treasury, which plans to sell the rest of its GM stake over the next 15 months. 

President Barack Obama and congressional Republicans are struggling to come up with a deal to avoid early 2013 tax hikes and spending cuts that many economists say could send the U.S. economy into recession.

House Speaker John Boehner, the top Republican in Congress, said in a one-minute press conference that his chamber will pass a proposal that Obama had already threatened to veto as it spares many wealthy Americans from tax hikes needed to balance the budget. Obama has already agreed to reductions in benefits for senior citizens. 

"My guess is they’re close to a deal, and right before, it looks like the deal is about to blow up either on manufactured or legitimate reasons," said Uri Landesman, president of hedge fund Platinum Partners in New York.

He said if the market thought a deal was in real danger, the S&P 500 would slide below 1,400. It stands now near 1,435, not far from a two-month high.Landesman said the VIX's stability indicates "the bulls have control of this market still."

Banks and energy shares - groups that outperform during periods of economic expansion - have led recent gains, indicating a shift to focusing on a growing economy as Wall Street looks past the budget talks.

The Dow Jones industrial average dropped 98.99 points, or 0.74 percent, to 13,251.97. The S&P 500  lost 10.98 points, or 0.76 percent, to 1,435.81. The Nasdaq Composite fell 10.17 points, or 0.33 percent, to 3,044.36.

NYMEX - TOKYO, Dec 19 (Reuters) - U.S. crude futures were steady near $88 a barrel on Wednesday, holding gains made over the past three days, supported by optimism that a deal could be struck to avert a U.S. budget crisis and keep the world's top oil consumer from slipping into recession.

CBOT Soyoil - Chicago Board of Trade soybean futures were lower on an outlook for a record large U.S. soybean plantings next year and on improving soil moisture prospects in some areas of the U.S. growing region, traders said.

* Private analytics firm Informa Economics lowered its

soybean acreage view for the U.S. for 2013 to 78.962 million, from 80.1 million but still surpassing the previous record of 77.451 million planted in 2009. Plantings in 2012 totaled 77.2 million.  

·         Cash basis bids for soybeans were mostly steady in the U.S. Midwest on Wednesday as light country offerings balanced the relatively limited demand for the commodity from exporters and processors, dealers said.

·         Analysts were expecting the USDA export sales report on Thursday to show U.S. soybean sales last week between 650,000 to 850,000 tonnes.

·         Heavy snowfall of 3 to 6 inches in the U.S. Plains and 8 to 12 inches in the northwest Midwest is expected today and tomorrow, according to John Dee, meteorologist for Global Weather Monitoring. But a storm system that had been expected in the same areas next week has been removed from the forecast, he said.

·         The heaviest snow in the Midwest will be in southeast Iowa, southeast Minnesota and southern Wisconsin and there also should be a half inch to 1.00 inch of rain in most of the Midwest, he said.

·         "Eastern Colorado, the northern half of Kansas and Nebraska will receive three to six inches of snow the next 24 hours with pockets of heavier snow," Dee said. Dee said the snow and some associated rainfall would help buoy soil moisture

·         levels and help stabilize river water levels. "It will be quiet tomorrow through next week and there are no cold air threats," he said.

 

·         Key resistance for the January contract is at its 200-day moving average of $14.73-1/2 per bushel. The nine-day relative strength index is at 37.

 FCPO - KUALA LUMPUR, Dec 19 (Reuters) - Malaysian palm oil futures inched lower for a second day on Wednesday as sluggish exports in the first half of the month fan concerns that stockpiles in the world's No.2 producer could hit another record high.

Weaker demand from top food consumers China and India early this month have traders worried that seasonally slowing output might not be enough to cut inventory levels, weighing on prices that have lost almost 27 percent this year.

Demand might have tapered off as palm oil tends to solidify in the northern hemisphere's current winter season, prompting buyers switch to competing soy oil, which has a lower freezing point.

"The major factor is still the end stock," said a trader with a foreign commodities brokerage in Malaysia. "The fear is still there -- that stocks are not going to draw down further if exports don't pick up the second half of this month."

The benchmark March contract on the Bursa Malaysia Derivatives Exchange fell 0.5 percent to close at 2,330 ringgit ($763) per tonne. Prices kept at a tight range of 2,313 - 2,338 ringgit per tonne.

Total traded volumes stood at 25,722 lots of 25 tonnes each, only slightly higher than the usual 25,000 lots, as some investors wound up positions ahead of the year-end.

Technical analysis showed palm oil prices remained unchanged at a bearish target of 2,285 ringgit, Reuters market analyst Wang Tao said.

Investors are pinning their hopes on the government's new crude palm oil export tax regime, set at zero for January, to help spur shipments of the grade and cut down record stocks, which hit 2.56 million tonnes in November.

"The case in the market is whether export demand can hold up and continue. That's why we are seeing palm oil pricing at such a large discount to other oils," said ANZ agricultural and commodity strategist Victor Thianpiriya in Singapore.

"We don't see the potential for a dramatic pick up in prices until early next year, and that's only if export demand continues to be strong."

Brent oil rose above $109 a barrel on Wednesday on expectations that a budget crisis in the United States will be resolved, saving the world's top oil consumer from slipping into recession.

In other competing vegetable oil markets, U.S. soyoil for January delivery edged up 0.4 percent in late Asian trade. The most active May 2013 soybean oil contract on the Dalian Commodity Exchange closed 0.9 percent lower.

Regional Equities - BANGKOK, Dec 19 (Reuters) - Philippine shares jumped 2.1 percent on Wednesday, their biggest one day rise in six months, after Moody's upgraded its outlook on the Philippine banking system while Thai stocks hit 17-year peak amid global appetite for risky assets.

Shares of banks led the rally in Manila, with Bank of the Philippine Islands up 3.2 percent and BDO Unibank Inc up 2.8 percent, sending the broader Philippine Composite index to 5,752.39.

The Philippine index had risen 31.6 percent so far this year, Southeast Asia's second best performer. It surged to a record finish of 5,831.50 on Dec. 11, entering extreme overbought readings and prompting a technical-led selling, traders said.

Market investors were hopeful of a prospect of sovereign rating upgrade which was supportive for further market rise, they said.

A Reuters analysis of Philippines companies with a market cap of greater than $50 million shows that the broker recommendations have not changed materially over the last 90 days.

The average rating score of the Philippines stocks went up marginally over the last 90 days to 2.39 from 2.47, Thomson Reuters data showed.

Thailand's SET index finished at 1,378.40, the highest since February 1996. Vietnam rose 1.3 percent to a two-month high as brokers kept positive views.