SunPrairie Grain Morning Comment

MINOT - Jul 30/10 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

Opening Calls:

Wheat: 7-10 higher Russia crop scare continues

Beans: 5-7 higher new crop sales are strong

Corn: 2-4 higher as corn follows the wheat market

Yesterday:

Despite having high US production prospects and a large global cushion

of wheat, the wheat market continued to rally on news of Black Sea

drought. Strong export sales also helped out the wheat market as US

wheat is expected to fill the production void that will come from lower

Black Sea Region production. Corn simply went along for the ride and

gained a few pennies in futures yesterday. Soybeans are finding

continued strength off of strong export sales - especially of new crop.

Farmer selling of soybeans is slow - so end users could have to pay up

to get beans into their hands.

Today:

The wheat market just won't quit! Overseas weather continues to push US

futures prices higher. European futures are reaching new contract highs

yet again today - further allowing US wheat futures to rise. Corn is

along for the ride and following wheat higher - fundamentally that

market doesn't have much reason to rally, either, but since when has

this market actually paid attention to fundamentals? Soybeans are

finding some strength of their own as new crop sales are strong.

Where is the breaking point in this wheat market? European futures are

surging on heat and dryness that is expected to continue in Russia and

Ukraine this coming week. Overnight trade was about a dime higher in

spring wheat September futures. Bruce Sullivan, CHS spring wheat

merchandiser, was in the office yesterday. His contacts in Europe have

said that the drought probably isn't as bad as what the markets are

making it out to be. Headline traders are running away with the news.

Even with all the technology today has to offer it is difficult for us

to get a grasp on just how bad things are over there but like I said

the market is taking the worst case scenario and going with it.

From everything that's going on today it looks like we'll see a higher

open in the wheat market. However the dollar is slightly lower which

could put a cap on things. Also, we need to keep in mind that it's the

end of the month. Fund managers are going to want their portfolios to

show that they're making some money - will they be selling wheat futures

in an effort to take profits? We'll see - but I'm somewhat cautious in

regards to today's opening calls.

The ND, SD, MN wheat tour came to a close. Over 300 fields were surveyed

and spring wheat bushels averaged 46.0 bpa. IN the Devils Lake - Pembina

area 50 bpa yields were found. Harvest is underway in NW Minnesota and

39bpa yields are being reported. Crookston looks like it should be ready

to go here quickly - according to the tour. Analysts were expecting

durum yields to come in at 44 bpa but the tour found 38.4 bpa (versus

36.2 found on last year's tour). Will this help out the durum market?

We've been finding some strength in that market lately but I think

buyers are just trying to cover previous business.

Winter wheat harvest is starting up in our area and I'm sure by next

week it'll be going strong. We've seen a few samples so far and proteins

have been anywhere from 9-13 and TW at a 59 average. There's been some

damage due to scab kernels on a few loads so be sure to keep an eye on

that. Otherwise things are looking pretty good and I'll do my best to

keep you updated on how things are coming in - thanks to Steve in our

lab for putting that all together for us!

The graph below is US wheat production by class - courtesy of Reuters.

For those of you that can't see it I've also attached the link.

http://graphics.thomsonreuters.com/F/07/US_WHTPRD0710.gif

As I mentioned above - corn doesn't have much of a fundamental reason to

be at its current levels. Yes, some fields are dried out and some have

excessive water. This will likely result in a reduced yield in the

August USDA report. Overall the crop is still doing very well. However -

I'm sure the corn market will just follow wheat as weather is not doing

anything exciting right now to tell corn to do otherwise. The soybean

market is finding strength on new crop soybean sales. The dollar has,

over the past few days, been weakening against South American currencies

- giving further reason for buyers' attention to turn to the US for

soybeans. Spillover support from the wheat market is also helping.

The pea market has been all over the place. Plantings in India are ahead

of 2009 with acres up 17.8% from last year. India is a key player in the

yellow pea market and they recently issued a tender to buy 100 TMT of

yellow peas. However - India specified that this shipment needed to be

of either French or Canadian origin. The food aid market continues to be

the big market for peas in the US ...and demand for the US government is

down from last year making it even more difficult to find an outlet for

the commodity.

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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