SunPrairie Grain Morning Comment

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

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Morning Outlook as of 7:45 CDT:

Wheat: 10-12 higher, following corn and soybeans, wheat is feeling overpriced and spring wheat harvest starts soon in areas - lower prices probable as we move forward (Mpls Sept last trade 9.31, KC Sept 8.41)

Soybeans: 4-6 higher, stronger than expected export sales for the week, concerns prices cut of Chinese demand limit gains (Nov last trade 15.29)

Corn: 15-17 higher, weather and ideas of further yield losses...but where is demand? (Sept last trade 7319 ½)

Sunflowers: 5-10 lower, prices fall with bean oil and crude, quiet demand lets prices fall also

Canola: 15-20 lower, futures sharply lower, market relaxes after strong recent gains

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

Yesterday:

The USDA surprised the market by estimating lower than expected corn and soybean yield numbers in its monthly report. Grain prices were initially higher but quickly succumbed to profit taking. It seems corn expected to see the lower yield estimate and the market feels that yield is likely even lower than the 146 bpa yield reported yesterday. For the most part, crop damage seemed to be priced into the market yesterday and prices were allowed to fall. Soybeans were the same story. Yield was cut further than expected, prices were higher and then struggled due to strong selling pressure and finished the day 18 cents lower. The wheat markets performed a lot better. Prices, like the row crops, were stronger, traded lower but then managed to claw their way back higher for the close. Spring wheat was up two cents and hard red winter wheat was up nine cents. Canola and sunflowers struggled in yesterday's session with soybeans trading lower. Outside markets were supportive as the US dollar was lower much of the day and crude was up over two bucks a barrel.

Today:

Grain markets put in their little correction yesterday and are on the trek for higher prices again this morning. Currently, corn prices are about 18 cents/bushel higher as yield losses are the major concern. Additionally, there is little to no rain in the short term forecast. However, the 6-10 day does show a little relief to some areas which may help some soybeans recover. Speaking of soybeans that market is posting gains of about seven cents right now. Better than expected export sales and weather are the reason for higher prices. However, there are thoughts that maybe beans are getting a little too high priced for export demand. Wheat prices are up again today with support from cuts to Black Sea Region production and stronger row crops being the main support. Canola prices struggle this morning as does soybean oil. Crude is off a buck and the US dollar is higher as fresh macroeconomic concerns hit the market. Ideas that Chinese growth could be slowing and that the Fed is in no hurry to start Quantitative Easing #3 have things on edge.

Winter wheat harvest keeps chugging along with "better than expected" results for yield and quality. However, I continue to hear that the baking characteristics of the hard red winter wheat crop from the southern plains leaves something to be desired. Wheat is considered high pried right now which may make things hesitant to climb higher. Additionally, spring wheat harvest will begin shortly in areas and that could put some pressure on futures as we move forward. Export sales for the week were near the low end of market estimates that ranged from 300-575 thousand metric MT(TMT) at 311.8 TMT. Despite cuts to production, Russian wheat remains competitive in the export market. However, we could see their sales slow as we move forward.

There are thoughts that recent, high prices in the soybean market could be cutting of Chinese demand. China auctioned off state soybean reserves and reportedly sold 99% of what was offered. Are Chinese domestic supplies now cheaper than imports from the US? For now, though, export sales are strong. Sales for the week were stronger than expected, coming in at 759.2 TMT which is above the range of 350-650 TMT estimated. Rain forecasts for the 6-10 day could limit gains in the soybean market as rains could help ease concerns about yield and crop quality issues. Canola futures are, for a lack of better term, tired. Prices have been chasing the US soybean complex higher and it seems that canola futures are just running out of steam this week. Canola is falling off a bit this morning with soybean oil and crude but may recover if soybeans exhibit strength through today's trading session.

The market is really beginning to wonder when corn futures will shift their focus from dry weather and production issues to demand. Corn is getting very expensive to export and we will likely see low demand as we move forward if some sort of correction does not take place. However, as with soybeans, export sales for last week were better than expected at 664.8 TMT, above estimates of 200-500 TMT. Other than that, there is little fresh fundamental news for the corn market right now and prices will remain focused on what happens with weather.

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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