SunPrairie Grain Morning Comment

MINOT - Sep 22/11 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

Opening Calls:

Wheat: 18-20 lower, US dollar sharply higher after Fed announcement yesterday afternoon, spurring liquidation of commodities (Mpls Dec last trade 8.24, KC Dec 8.42 ¾)

Soybeans: 27-30 lower, crude futures down about $5.00/barrel, rebounding slightly from earlier, outside markets main driving force today (Nov last trade 12.94)

Corn: 20-25 lower, Fed statement about US economics and potential downside risk (Dec last trade 6.66)

Sunflowers: 40-50 lower, unfavorable outside markets and sharply lower crude oil prices

Canola: 50-100 lower, Canadian dollar higher, US CBOT soybean complex lower, crude oil lower

*2012-13 Contracts*

We have the following available:

AOG Malt Barley: $6.85/bu

Cash Canola: $23.35/cwt

Cash Flax: $13.30

*bids are of Friday's close and are subject to change, please call for pricing

There will not be a "regular" canola AOG contract available this year. However, we will have our Victory canola (hi-oleic) contracts available shortly. AOG flax contracts will be available in the coming weeks. We will also have our hi-oleic sunflower contracts available soon. We have hedge to arrive and minimum price contracts (which involve the purchase of a call option) for spring wheat, winter wheat and soybeans. Call for more information!

Yesterday:

Grains tried, yet again, to trade higher yesterday but failed to sustain upward momentum. Corn slid and ended the day a nickel lower. Soybeans were down 15 cents, canola 20 cents and sunflowers were down a dime. Crude was down over $1.25/barrel and pulled the grain markets right on along with it. Wheat ended the day a few cents lower, falling with corn and being pushed lower by a rising US dollar. The markets were awaiting the Fed policy announcement that came yesterday afternoon and what comments might be made about the state of the US economy. Also, a lack of fresh fundamental news to drive prices higher let prices drift lower.

Today:

Yikes. Everything is sharply lower this morning and it looks like things could get a little ugly today. None of it has anything to do with grain fundamentals - this is all about macroeconomics and yesterday's Fed announcement about the state of the US economy. The US dollar is sharply higher and crude oil is about $5/barrel lower...which is good for our gas prices but not so good for our grain prices. In overnight trade wheat is down about 18 cents, corn 20 and soybeans nearly 30 cents. Soybean oil and canola futures are also sharply lower and it wouldn't surprise me if we saw things fall off even further when the markets open at 9:30. Export sales for the week were released but my guess is the market won't pay them any attention.

Yesterday afternoon the Fed warned that there are "significant risks" to the US economy and that the current slump we're in could last for years. The Fed also announced an economic stimulus plan, but the market expected that. The extremely bearish outlook for the US economy is the culprit for sharply lower grain prices.

A higher US dollar is going to deflate the wheat market today. Charts will tell you that wheat futures are looking oversold...but in the wake of the macroeconomics right now it just doesn't seem to matter. Wheat export sales were expected to come in at 400-550 TMT but came in above that at 679.5 TMT. No matter, though, as outside markets will push prices lower this morning. Southern Plains dryness should boost prices as well as there seems to be no relief in sight for the driest winter wheat areas.

Soybean exports sales were in line with expectations of 350-550 TMT at 404.4 TMT. Sales weren't really that exciting and a lack of demand won't do the market any favors today when prices are falling due to the latest Fed announcement and sharply lower crude oil prices. Canola futures are down about $5 Canadian per MT a rising US dollar won't help cash prices either. One buyer emailed that cash canola prices could be as much as $1/cwt lower this morning, depending on how things open. Yeecchh.

Corn is not escaping the market downward slide, either. Corn futures finished the overnight session 20 cents lower and it wouldn't surprise me if it got worse today before it started to get better. Sure, crude has recovered almost $1 off its lows, but it's still down almost $5 per barrel. Export sales were pretty dismal, especially when compared to last week, at 598.1 TMT, at the low end of estimates of 550-850 TMT.

It could be interesting today, everybody. Hopefully we can get some sort of recovery soon as these markets have had very little strength lately.

As always you can reach me at Kayla.Burkhart

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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