SunPrairie Grain Morning Comment

MINOT - May 31/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Market Outlook as of 8:35 CDT:

Wheat: 3-5 lower, winter wheat harvest brings higher than expected yields, favorable global wheat conditions (Mpls July last trade 7.60 ½, KC July 6.74)

Soybeans: 4-6 lower, fund liquidation continues, pushing soybean prices lower, also some bearish news from China keeps prices lower (July last trade 13.68 ¼)

Corn: OC up a penny, NC lower, demand sagging but yield concerns provide support (July last trade 5.60 ¾)

Sunflowers: 5-10 lower, falling with bean oil and crude futures as demand is still lacking

Canola: 5-10 lower, futures falling with soybean complex

*For those of you with AOG contracts (Flax, NuSun Sunflowers, HO Sunflowers, Victory Canola and Malt Barley) - we need land descriptions and FSA 578s as soon as you have them. Thank you!*

Yesterday:

Crude futures really were hit hard yesterday, falling below $88/barrel for the first time since October. Soybeans, sunflower and canola prices were all pulled lower all posting double digit losses for the day. Soybeans also saw some pressure come from ideas that Chinese demand could be falling off. The US dollar was higher which did not help anything at all. New crop corn conditions fell yesterday which tried to provide some support to new crop prices, but old crop prices fell off a couple of cents by the end of the day with unfavorable outside markets. Spring wheat prices were down seven cents but hard red winter wheat managed to finish a penny higher. Oats fell off another dime as the losses in the market just won't stop. It seems profit taking will not stop in these markets lately.

Today:

It is yet another lower looking day for the grain markets as broad based commodity selling seems to be the thing to do as of late. Soybean futures are off about six cents on concerns from China and commodity liquidation. Bean oil and crude are also lower which will add pressure to the other oilseed markets. Spring wheat prices are about three cents lower and hard red winter wheat is off about a nickel this morning. Global weather and US harvest are the main components for lower prices in the US wheat markets lately. Old crop corn prices are trying to trade higher (tight supplies) but new crop is struggling with crop conditions being the only real support to the market right now. Trade is very light, fresh fundamental news is thin and these markets are uncertain about what to do. Weather forecasts and Midwest rainfall coverage will likely be the main price drivers as we move forward. Export sales for the week will be reported tomorrow instead of today due to Monday's holiday.

Winter wheat harvest is reportedly bringing better yields than expected - although I'm not hearing exactly what those yields are just yet. Protein remains high and harvest has moved all the way up into Central Kansas. Some rain delays have been reported but I think this will be a big week for hard red winter wheat harvest. Rains to the Black Sea region and Australia are viewed as unfavorable to US wheat prices as it sucks out the weather premium we worked to build into the market. Exports from India are expected to pick up pace in July. It is estimated that India could have stocks of up to 80 million metric MT India has the capacity to store only 63 MMT of wheat. The excess supply and lack of storage space is why India has lifted its export ban and is selling wheat. The US does not need additional export competition in a market that is already tough to find business in.

China sold off some of its state reserves of soybeans at cheaper prices than what imported beans can be bought at. Chinese crush margins are declining and cheaper soybeans are needed wherever they can get them. Consequently, we may see a bit of a reduction in Chinese soybean demand. Additionally, the Brazilian real continues to decline which will likely spur additional export business. Could China continue to move its business to South America? There is some favorable news for the soybean market, though. First off, Argentine production could be even tighter than already forecast. Tight global supplies could keep prices from falling off too far. Also, US emergence is being slowed by a lack of moisture. Rain is needed to make the market less concerned about the newly planted crop.

Corn prices are struggling with lower wheat and soybean prices. Demand is lagging and Brazil is harvesting its second crop which looks to put production at much bigger levels than last year. New crop prices could have losses limited by declining crop conditions and ideas that yield is likely lower than the current USDA estimate. The USDA pegged 2012-13 corn yield at an aggressive 166 bushels per acre. With recent dryness the market is convinced that yield likely will not get that high, even with the early planting season. The corn market is all about weather right now and conflicting reports and forecasts of rainfall across the Midwest simply have the market confused. Areas of Illinois and Indiana are forecast for rain which may ease concerns, but dry weather is expected to continue after showers move through.

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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