July soybeans were trading 8 cents higher near 7:30 cst. China futures closed slightly higher overnight while Malaysia palm oil prices were up 0.1% after falling 3.5% yesterday. Asian stocks were stronger overnight, as the markets in that region were lifted by talk of coordinated central bank intervention. European equities were also positive off hopes of central bank action but many investors remain concerned about Spanish and Greek problems overwhelming efforts to contain the debt crisis. Early US equity market action was also higher and that is impressive after the noted run up in prices the prior trading session. The US scheduled report slate today is pretty active, with Industrial Production and Capacity Utilization readings as well as the Empire State Manufacturing report. There will also be a Treasury International Capital flows report and a Michigan Consumer Survey.
Trade uncertainty on the weather remains a key factor into next week as hefty rain amounts for the western and northern Midwest clash with drier amounts for the eastern Corn Belt for the next ten days. Some rain is expected but areas which have not received rain in the past week which include much of Indiana, the northern and eastern parts of Illinois, southeastern Wisconsin and parts of Ohio could see significant stress if actual rains are less than 1/2 inch for this time frame. Outside forces look positive this morning but there is significant concern that Sunday night factors for global financial markets and the weather outlook in the US could shift sharply in either direction. Basis in the US was a bit weaker with more talk that the rally has attracted some increased movement. July soybeans closed sharply lower on the session yesterday and gave back nearly half of the June 1st to 12th rally. A strong recovery in outside market forces plus a surge higher in corn and wheat failed to provide more than temporary support. Even very strong short-term demand news failed to support follow-through buying and the market experienced a steady flow of fund trader selling for much of the day. Higher than expected weekly export sales news and higher than expected monthly crush news failed to support. The NOPA crush for May came in at 138.3 million bushels which is up about 3 million from trade expectations. This, along with very strong old crop exports has traders pushing down ending stocks estimates by 20-40 million bushels from the 175 million posted this week. If beginning stocks for the 2012/13 season are lower, this leaves the new crop outlook extremely tight and the USDA assumes a high yield. Traders do expect a sharp rise in double-crop soybean acres and hefty rains in Kansas overnight may help allow for more active plantings as it has been too dry. Weekly export sales came in at 425,100 tonnes for the current marketing year and 580,000 for the next marketing year for a total of 1.005 million tonnes which was about twice expectations. Continued talk of fund trader liquidation of July bean/July corn spreads added to the bearish tone yesterday.
The weather appears threatening but there could be enough rain to hold conditions normal and a pattern shift into late June might boost crop ideas. However, if the eastern Corn Belt stays drier than normal into July, this could set up for explosive action. Eastern Corn Belt areas that miss out on rains could be under significant stress by this time next week. There appears to be a lack of a weather premium and demand numbers alone look to tighten the situation considerably.

Technical Analysis

SOYBEANS (JUL): Positive momentum studies in the neutral zone will tend to reinforce higher price action. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market setup is somewhat negative with the close under the 1st swing support. The near-term upside target is at 1424 1/2. The next area of resistance is around 1401 3/4 and 1424 1/2, while 1st support hits today at 1370 1/4 and below there at 1361 1/4.

StockMarketNews Research Team