* USDA report showed higher forecast of supplies * Palm oil to head towards 3,140 ringgit - technicals * Malaysian weather office upgrades heavy rain warning (Updates prices, adds details) By Chew Yee Kiat SINGAPORE, Jan 13 (Reuters) - Malaysian crude palm oil futures slipped on Friday as a much-anticipated U.S. crop report showed a higher-than-expected forecast of oilseed supplies, temporarily overshadowing prospects of lower production due to erratic weather. The U.S. Department of Agriculture January crop report painted a rosier picture for global supplies on Thursday. The Malaysian Palm Oil Board similarly said on Tuesday that December stock levels were higher than expected. "With both the highly anticipated reports disappointing the bulls, the market will henceforth look at fundamentals," said a trader with a local commodities brokerage in Malaysia. By the midday break, benchmark March palm oil futures on the Bursa Malaysia Derivatives Exchange fell 1.3 percent to 3,160 ringgit ($1,009) per tonne. Prices earlier touched an intraday low of 3,156 ringgit, a level last seen on Dec. 30. Traded volumes stood at 13,471 lots of 25 tonnes each, higher than the usual 12,500 lots for the first time in the week. Palm oil futures will clear a support at 3,176 ringgit per tonne to head towards 3,140 ringgit thereafter based on technical analysis, said Reuters market analyst Wang Tao. While the bearish USDA report sent the markets lower, weather concerns should continue to provide support for oilseed prices. "Soybeans losses were smaller than those for corn or wheat as it found underlying support from continued worries about damage to Argentina's soybean crop due to hot, dry weather," said Abah Ofon, agricultural commodities analyst with Standard Chartered Bank in Singapore. Similarly for palm oil, traders are keeping a close watch on wet weather in key exporter Malaysia as floods could disrupt production, adding pressure to tightening stocks. The Malaysian weather office upgraded its heavy rain warning from yellow stage to a more serious orange stage for Pahang and Johor, key oil palm producing states that account for 30 percent of national output. The industry expects January production levels to be lower but demand is expected to follow suit. Cargo surveyors Intertek Testing Services and Societe Generale de Surveillance reported a 14 and 19 percent drop in Malaysia's palm oil exports for first 10 days in January. The cargo surveyors will release exports data for Jan. 1-15 on Monday. Brent crude rose above $111.50 a barrel on Friday, boosted by worries over supply disruption from Nigeria, while easing fears on the euro zone debt crisis after positive demand in Spanish and Italian debt sales supported sentiment. The bearish USDA report also weighed on other vegetable oil markets. The most active U.S. soyoil for March delivery eased 0.1 percent while the most active September 2012 soyoil contract on China's Dalian commodity exchange lost 0.7 percent. "Historically speaking, the price movement following the January report may last a while, maybe 1-2 weeks. But the South American weather still remains a concern for the soyoil market," said Huang Zhi Qiang from Guotai Junan Futures in Shanghai. Palm, soy and crude oil prices at 0436 GMT Contract Month Last Change Low High Volume MY PALM OIL JAN2 3140 -67.00 3140 3140 4 MY PALM OIL FEB2 3166 -54.00 3165 3190 900 MY PALM OIL MAR2 3160 -42.00 3156 3186 6631 CHINA PALM OLEIN SEP2 8052 -90.00 8046 8110 45564 CHINA SOYOIL SEP2 9010 -64.00 9006 9050 147488 CBOT SOY OIL MAR2 51.43 -0.03 51.22 51.75 3782 NYMEX CRUDE FEB2 99.85 +0.75 99.12 99.89 6755 Palm oil prices in Malaysian ringgit per tonne CBOT soy oil in U.S. cents per pound Dalian soy oil and RBD palm olein in Chinese yuan per tonne Crude in U.S. dollars per barrel

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