SunPrairie Grain Morning Comment

MINOT - Jul 16/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Morning Outlook as of 8:35 AM CDT:

Wheat: 20-22 higher, ideas Black Sea region production is falling substantially has US markets excited (Mpls Sept last trade 9.69, KC Sept 8.75 ¼)

Soybeans: 37-39 higher, USDA expected to cut crop conditions again this afternoon by 5-8% (November last trade 15.92 ¼)

Corn: 28-30 higher, hot and dry weather dominates forecast for next 10 days (Sept last trade 7.68 ½)

Sunflowers: 5-10 higher, climbing up with soybeans, crude

Canola: 20-25 higher, futures much stronger with soybeans

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

Friday:

We saw a little bit of two sided trading in the corn market as futures seemed hesitant to trade higher. However, quiet producer selling and fund buying managed to push prices sharply higher by the end of the day. Soybeans saw some light selling but demand and announcement of a sale to an unknown destination pushed cash prices seven cents higher by the end of the day. Wheat prices were stronger with row crops and concerns about global supply of high quality milling wheat as crop conditions seem unfavorable across many major global production areas. Both spring wheat and hard red winter wheat prices finished the day posting double digit gains. Canola prices were weaker on the day and sunflowers were unchanged.

Today:

We start yet another week stronger in the grain markets as everything remains all about weather. Corn prices are surging higher again this morning, posting gains of about 30 cents. Forecasts look hot and dry for the next 10 days which has the markets pretty concerned about US production. Crop conditions for both corn and soybeans are expected to fall further in this week's USDA weekly crop progress and conditions report. The USDA reportedly declared over 1,000 counties in 26 states in a state of natural disaster due to this year's drought. Wheat prices are up about 20 cents a bushel this morning as news out of the Black Sea region remains favorable for prices. Crude is bouncing around either side of unchanged this morning and the US dollar is lower.

Reductions in Black Sea region production estimates have the wheat markets excited this morning. It seems these markets are pretty concerned about where the world is going to find enough milling quality wheat as production issues have popped up in Australia, Europe, the US and the Black Sea region so far this year. Despite deteriorating global conditions, though, spring wheat export sales remain very quiet and basis values are left on the defensive. Spring wheat selling has picked up which keeps buyers in good supply but with little demand, basis has no reason to hang on. Spring wheat harvest is beginning in some areas as well which could put some pressure on futures values.

Soybean crop conditions are expected to see another sharp decline this week as rain refuses to fall and the crop reaches critical growing stages. Some areas are getting close to the "point of no return" and flat out need rain if the crop is to mature. Futures values are soaring higher again this morning again, pulling soybean oil and canola futures along with it. Some unfavorable news, though, is that Brazilian crop estimates for 2012-13 are increasing. Will we see a lot of US demand go south? For now that does not seem to be the case as a decent sale to an unknown destination was reported on Friday.

Corn futures are 30 cents higher this morning as hot and dry conditions are expected to remain. Additionally, fund buying is pulling futures higher as well as speculators build long positions in the corn market. Futures are setting new contract highs daily and I really wonder how much steam is still left in this rally. However, ideas that the US will produce sub 140 bushel per acre corn this year will remain supportive. Expectations for crop conditions to fall further for corn this afternoon will keep things supported as we trade through today's session. Ideas that growers are mowing over corn fields in areas of the corn belt indicate that US harvested acres could decline from the 96 million we planted this year.

Stronger this morning as weather remains the key factor. Action in the US dollar and crude markets hardly matters as we focus solely on what will be produced this year.

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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