SunPrairie Grain Morning Comment

MINOT - Jul 3/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Market Outlook as of 7:45 CDT:

Wheat: 2-4 higher, prices stronger with fall in spring wheat condition ratings, higher corn and soybeans provide support as well (Mpls Sept last trade 8.66, KC Sept 7.81)

Soybeans: 8-10 higher, ratings take a larger than expected cut, pushing soybean prices higher (November last trade 14.47 ¾)

Corn: 10-12 higher, crop condition ratings decline, fund buying creates higher prices (September last trade 6.62 ¾)

Sunflowers: 5-10 higher, stronger crude and soybean oil prices work to pull flowers up

Canola: 15-20 higher, market plays catch-up after being closed yesterday and seeing gains again today

*Markets close today, July 3rd at noon. Pit and electronic trading then reopen July 5th at 9:30 AM. There will not be a grain update for the balance of the week. Have a safe and happy Fourth of July holiday!*

Yesterday:

Grain markets were stronger yesterday as the talk was all about weather. Hot, dry forecasts in the Eastern Corn Belt combined with light weekend rains worked to push corn prices 24 cents higher yesterday and prices ended well above $6 for old crop corn. Soybeans followed along for the ride, some encouraging news from the USDA announcing a large sale to an unknown destination also provided some support and prices finished the day over a dime higher. The International Grains Council (IGC) cut its global production estimate for wheat, which worked to push both spring and winter wheat prices higher. Spring wheat finished the day 18 cents/bu higher and winter wheat was up 21 cents/bu. We finally saw durum make a move with top milling finishing the day 50 cents higher. Flax prices saw gains of a dime yesterday, following the soybean complex higher, but sunflowers and canola were unchanged.

Today:

It is looking like a stronger day yet again today. There is literally no end in sight to the hot and dry weather and crop conditions for corn and soybeans are deteriorating rapidly. The USDA cut crop conditions by more than expected for both crops yesterday and we're seeing a reflection of that in today's trading session. Wheat prices are following row crops higher and also seeing some support from cuts in spring wheat crop conditions. For what it is worth - the US dollar is slightly higher this morning. Crude prices are also stronger - posting gains of about $2.45/barrel. Stronger crude prices could also be spurring some buying interest in other commodities as well. Typically grains are pretty quiet in front of a holiday but that does not look to be the case today. Canola futures are posting strong gains as they make up for being closed yesterday.

Spring wheat crop condition ratings fell off quite heavily yesterday. It seems even the spring wheat crop cannot escape the dry weather talk and weather market that the rest of these grains have fallen into. Overall the spring wheat crop is rated 71% good to excellent which is a 6% decline from last week's ratings. North Dakota spring wheat remains above the curve and is rated 80% good to excellent, however this is a sharp decline from last week's rating of 89% good to excellent. European wheat futures are higher which also lends a helping hand to our wheat prices. Additionally, the IGC's reduction in global wheat production is also favorable. Winter wheat harvest is moving along and is, according to the USDA, 69% complete. The US barley crop is rated 61% good to excellent, down 5% from last week's rating. ND barley is also rated well at 81% good to excellent, down from last week's rating of 87% good to excellent.

Soybeans are leading the way higher this morning as crop condition ratings were cut by far more than what the market had expected. The US soybean crop is now rated 45% good to excellent versus last week's rating of 53% good to excellent. North Dakota soybeans are rated 77% good to excellent as our fair state has received much more rain than many of the other major crop growing areas of the US. The soybean market is seeing wide trading ranges in front of the holiday but seems to have calmed down for the time being. Demand remains strong which will be a supportive factor to the market as we move forward. For now, though, all eyes remain on weather.

The IGC somewhat surprisingly to me increased global corn production estimates, citing favorable conditions in China and India. Not so favorable conditions exist in US growing areas, though, as ratings fell a whopping 8% from last week to 48% good to excellent. The 2012 crop is reportedly the lowest rated crop since 1989 which saw crop ratings this week of 23% g/e. North Dakota, though, remains ahead of the curve and has a corn crop rating of 81% good to excellent. Hopefully that stays strong. There are indications that demand could be slowing down for the corn market. We've already heard chatter about ethanol plants shutting down until new crop and now it seems that export demand is getting quiet as well. Export inspections for the week were well below what was needed to stay on pace with current USDA estimates.

I hope everybody enjoys their holiday weekend!

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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