SunPrairie Grain Morning Comment

MINOT - Jul 29/10 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

Opening Calls:

Wheat: 10-12 higher as we continue to get negative news out of Russia

Soybeans: 5-7 higher exports are strong

Corn: 4-6 higher following the wheat market

Yesterday:

Corn and soybeans decided to follow wheat higher yesterday and both

managed to hold a higher close. Wheat market continues to gain on news

out of Russia and increasing European prices. It seems that the market

just wants to find reason to trade higher and is paying attention to the

worst of the worst news coming from overseas. There's no way at this

point to estimate how much production is going to be down due to drought

in the Black Sea region - so the market is following the worst possible

outcome. However, things are rarely as bad as they seem. What happens if

Russia has a crop and things aren't as bad as the market seems to think?

Like Raaper says "it's like WalMart...watch for falling prices".

Today:

Overnight trade was higher once again. I keep waiting to come into work

and see negative prices on the board but we keep pushing through. Spring

wheat futures were up 12 cents on September, corn up a nickel and beans

up seven. The dollar is getting whacked, adding support to grain futures

this morning. Wheat continues to freak out over news from Russia and

corn and soybeans are along for the ride. Crude oil is helping out as it

is up over $1.30 a barrel at the moment. Favorable US crop weather will

continue to put a lid on corn and soybean gains.

Wheat is the exciting market right now so maybe I'll start out with that

for a change. European milling wheat futures are going through the roof

and reaching new highs - which is allowing US wheat futures to do the

same. It's all about Russian production at this point. Like I said

earlier - there's no way to know for sure how much Russia has lost in

wheat production - but the market is taking the worst possible scenario

and running with it. Basis continues to disagree with higher futures

prices and continues to fall as futures gain. However - losing a nickel

in basis and gaining 20 cents in futures still leaves a pretty decent

net gain for the day. Exports for wheat were very impressive. Estimates

were 300-400TMT and sales were over double that at 919.9 TMT. A lower

dollar is no doubt helping prices and it seems like we have definitely

not lost demand as cash prices for wheat skyrocket. Railcar placements

are running behind but basis is not reflecting any sort of wheat supply

crunch at this point in time.

The ND wheat tour as of yesterday afternoon had stopped at 147 fields,

34 of them durum. Spring wheat is sticking in that 46bpa range and durum

at 38.9bpa. Central ND yields are coming in at levels above last year's.

Ben Handcock, executive VP of the Wheat Quality Council noted that

disease pressure is "almost nonexistent". He adds "we are either in one

of the best areas of the state or we have been very lucky in fields

surveyed". According to the report - some tan leaf spot disease has been

found but the crop is far enough along that damage is unlikely. Protein

is still up in the air but concerns are around as high yields usually

means low protein.

Soybeans are finding support from a weaker USD boosting exports. Weekly

export sales were 1,483 TMT and estimates were 1,000-1,200 TMT. Soybeans

will likely find strength today from export news. Corn is hoping that

China will continue to import additional US corn this year. However,

overall the local China crop is looking very good and domestic prices

have eased - making importing less necessary. The corn market is very

much watching US weather which is adding no stress on the crop. Exports

were 960.4 TMT versus estimates of 800-1,000 TMT.

Barley prices are being supported by the recent gains in wheat and corn

prices. Barley is also used as a feed substitute - and lower feed wheat

production could help increased demand for US feed barley. Keep an eye

on what's going on with corn and wheat to get an indication of what may

happen in the barley market.

As always you can reach me at Kayla.Hoffman

To discuss this report further or for specific trade ideas please contact me

directly

Kayla Hoffman

SunPrairie Grain

Kayla.Hoffman@chsinc.com

Toll free: 800.735.4956

Local: 701.852.1429

Fax: 701.839.5515

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