Morning Futures Roundup

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Muted Reaction by Traders to USDA Report

   Fundamentals
After a brief bout of volatility just after the USDA released its June Crop Production & Supply/Demand report, trading activity turned quiet, as traders noted few major changes in the Government's data. This report was being closely watched by both traders and industry participants, as it was the first major USDA report to be released during market trading hours.

The Soybean figures were viewed by analysts as the most "bullish" in the data, as the USDA expects tighter U.S. supplies. Ending stocks estimates for 2011-12 were lowered by 35 million bushels from the May report. Much of the decline was due to rising exports, with the USDA raising U.S. Soybean export totals by 20 million bushels. New-crop ending stocks estimates were lowered by 5 million bushels to 140 million bushels. New-crop Soybean prices remain high due to concerns that dry weather may hurt average yields, which given tight global inventories, seem to deserve a "risk premium" during the growing season.

Some traders were more bearish on the data for Corn futures, as the USDA kept 2011-12 ending stocks unchanged from the May estimate at 851 million bushels. Many traders were expecting a 20 to 30 million bushel cut in ending stocks. The USDA did raise its Corn usage estimate for Ethanol production by 50 million bushels, but offset this by lowering U.S. Corn exports by an equal amount, citing increased export competition, especially from Brazil.

   Technical Notes
Looking at the daily chart for November Soybeans, we notice what appears to be a large "bull flag" formation, with prices now testing the upper boundary of this technical pattern. Prices are now well above both the 20 and 200-day moving averages, giving the technical advantage to both long and short-term bean bulls. The 14-day RSI is neutral to moderately supportive, with a current reading of 57.15. A breakout above the upper boundary of the "bull flag" may set-up a test of the May 2nd high of 1394.50. Support is seen at the 20-day moving average, currently near the 1295.75 area.


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