SunPrairie Grain Morning Comment

MINOT - Jul 10/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Morning Outlook as of 8:30 CDT:

Wheat: 10-12 lower, market corrects after posting substantial gains despite somewhat favorable news regarding global production hitting today's newswires (Mpls Sept last trade 9.15 ¾, KC Sept 8.17 ¼)

Soybeans: 9-11 lower, profit taking on bought positions, readying for tomorrow's USDA reports (Nov last trade 15.40)

Corn: 11-13 lower, rain chances pop up in some areas for short term forecast, market corrects lower (Sept last trade 7.19 ½)

Sunflowers: 5-10 lower, falling with crude, bean oil, sunflowers take any chance they can to trade lower

Canola: 5-10 lower, falling with the soybean complex as there is little other fresh news to influence price direction

*Those with AOG contracts (malt barley, flax, NuSun sunflowers, Victory Canola, HiOleic Sunflowers) - please submit your FSA 578s ASAP. Thank you!*

Yesterday:

Financial markets were mostly weaker yesterday but grain trade paid no mind as it remains all about weather. Little precipitation fell over many corn growing areas with the major corn growing areas missing out completely. This worked to push corn futures higher despite lackluster demand. By the end of the day cash corn prices skyrocketed 39 cents higher to $6.62/bushel locally. Soybeans also shot higher yesterday, gaining 42 cents on the day. Soybean futures saw new contract highs yesterday as prices continue to climb higher with hot and dry weather and strong demand. Wheat followed row crops higher yesterday with some fundamental support coming from Russia flood concerns and global production issues. Flax, sunflowers and canola all followed along for the ride yesterday.

Today:

Well it looks like we are in for a bit of a correction in today's trading session. The correction really is not much of a surprise, it seems that these markets are perhaps readying for tomorrow's USDA S&D report. At the moment, spring wheat is down 12 cents and winter wheat is down 14 cents. Soybeans are off about a dime, recovering from the lows of overnight trade quite nicely. Corn prices are off about 13 cents despite sharply lower crop condition ratings for the second week in a row. Rain chances over areas of the Midwest in the next five days could be part of the reason we're seeing lower grain prices. However, it seems more likely that we're seeing some profit taking before tomorrow's USDA report.

Wheat prices are lower today despite some chatter from different countries regarding lower wheat production. For example, a recent estimate from Kazakhstan saw a drastic reduction in grain production due to dry weather. There is also talk of Kazakhstan cutting its export program this year after having a record export year in 2011-12. Additionally, there are some decreasing estimates for Australian production as well. Crop condition ratings for spring wheat declined in yesterday afternoon's USDA crop conditions report to 66% good to excellent from 71% last week. North Dakota spring wheat is ahead of the curve, rated 74% good to excellent. There is talk of some dry weather concerns hitting Montana. Barley is overall rated 57% good to excellent, down from last week's rating of 61% good to excellent. However, as with nearly every other crop, ND ratings are ahead of the curve with our barley crop rated 77% good to excellent. For what it's worth - hard red winter wheat harvest continues to move north with South Dakota harvest now 41% complete. Overall hard red winter wheat harvest is 75% done.

There is not much fresh news for the soybean market right now. Profit taking his hitting prices and has futures lower for now. However, we are well off of our lows for the evening and it really would not surprise me if we continued to crawl closer to unchanged as the session progresses. Demand remains strong for soybeans and that will work to keep prices supported. Additionally, there were more cuts to crop conditions in yesterday's USDA report. The US crop is now rated 40% good to excellent which is a decline of 5% from last week's ratings. North Dakota soybeans, though, are rated 71% good to excellent. The USDA is expected to peg US 2012-13 soybean yield at 42.3 bushels per acre which is lower than initial USDA estimates.

Well there are some rain chances for areas of the Midwest within the next five days. However these rains will not bring back yield losses we have already incurred, but could help prevent any further crop damage. Crop conditions declined by another 8% this week to 40% good to excellent. This means that corn crop ratings have fallen a whopping 16% within the last two weeks - yikes! The market is correcting just a little bit in front of tomorrow's USDA report which is expected to show a US yield of 151.1 bushels per acre. This is also significantly lower than the initial yield estimate given by the USDA earlier this year. Demand remains quiet as prices are just too high to attract buyers right now.

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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