SunPrairie Grain Morning Comment

MINOT - Jun 13/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Morning Outlook as of 8:35 CDT:

Wheat: Mixed - market tries to separate itself from lower corn prices as dry global weather becomes a concern (Mpls July last trade 7.65, KC July 6.40 ½)

Soybeans: 17-20 lower, reductions in old crop carryout estimates from the USDA yesterday are not enough to pull prices higher (July 14.18 ¼)

Corn: 8-10 lower, short term forecast calls for rain and corn futures are falling based on that news (July last trade 5.76 ¾)

Sunflowers: 5-10 lower, bean oil is off with the soybean market and lower crude oil prices

Canola: 10-15 lower, futures fall with soybean complex, crude and high acreage expectations for ND and Canada

*For those of you with AOG contracts (Flax, NuSun Sunflowers, HO Sunflowers, Victory Canola and Malt Barley) - we need land descriptions by June 15th and FSA 578s by July 15th. For those of you with planted Victory Canola -remember that you can price an additional 250 lbs/acre with an AOG. Thank you!*

Yesterday:

Despite some favorable news for a few commodities in yesterday's monthly USDA report grain futures finished the day lower. Spring wheat lost 15 cents and hard red winter wheat was down 12 cents by the end of the day. Global stocks were cut for wheat which was viewed as supportive but it just was not enough to keep prices higher and gains were given up as the session progressed. Corn was expecting to see a decrease in old crop carryout estimates, which would have likely resulted in a decrease in new crop carryout estimates as well. The USDA left corn carryout estimates unchanged and prices fell, posting losses of four cents by the end of the session. Soybeans saw a bigger than expected cut to stocks in yesterday's report which had futures higher. However, basis fell off locally which saw prices down 54 cents by the close of the day. New crop soybean basis was left unchanged at -$1.00 the November contract. Canola struggled but sunflowers and flax were left unchanged. Declining crop conditions may have also provided some support to soybeans but could not help the corn market.

Today:

Grains are mostly lower this morning with some wheat futures contracts trying to post gains. Spring wheat is up a penny right now on old crop but new crop is down about two cents. Hard red winter wheat is fractionally higher. Soybeans are sharply lower, posting losses of about 16 cents/bushel. Corn is six cents lower, bean oil is off, canola futures are showing losses and crude oil is down about $1/barrel. The US dollar is lower which has lately been providing support but that does not seem to be the case today. Short term weather forecasts for the Midwest are calling for rain and that seems to be the main factor in the corn and soybean markets. Trade is thin and choppy which is likely why we are seeing such mixed trade direction.

Wheat looks like it is trying to divorce itself from corn market direction as some fundamental news works its way into the market. First off, Australia decreased its winter wheat production estimate. The Australian crop is expected to be nearly 20% lower than last year's record production. European exports are expected to be lower in 2012-13 due to crop development issues decreasing production. This is good news for the US wheat markets. Additionally, there are some chatter about an El Nino weather pattern forming which, if realized, could bring wet weather to the US, China and even Russia. According to the experts, this will be a slow developing weather pattern. El Nino typically brings dryness to Southeast Asia and India. We'll see. It seems wheat prices are also trying to recover from yesterday but are just struggling to do so even though losses are considered overdone.

Soybeans are getting hammered today and I cannot quite figure out why. Yesterday the USDA cut old crop US carryout estimates which worked to push futures prices higher. However, today we are giving back all of those gains and then some. Perhaps it is falling crude prices that is pushing soybean futures lower. I mentioned an Argentine farmer strike last week - that ended with no major impact to the market but with talks of additional strikes as we move forward. Canola futures are lower with soybeans and soybean oil. Sunflower prices will likely struggle today with lower bean oil and crude, as will flax. As I said, trade is thin, choppy and light which is probably contributing to the lower move in soybean prices today.

Some chances of rain to the US corn growing areas has corn futures on edge today. Despite a reduction in crop condition ratings corn futures prices just continue to fall. Long term forecasts, though, are calling for drier weather which will probably work to keep prices supported as we move forward. There is really little to report for corn right now as it is really just a weather market and I can talk about weather forecasts only so much. Local basis values remain quiet for now. I expect to see new crop basis fall off if US production looks to match current USDA estimates. Perhaps a basis contract for those bullish corn futures and wanting to price some corn is a good idea...

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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