SunPrairie Grain Morning Comment

MINOT - Jul 18/12 - 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: 4-6 lower, spring wheat holds up better than winter wheat markets, markets relax with row crops, unfavorable outside markets (Mpls Sept last trade 9.80 ½, KC Sept 8.84 ¼)

Soybeans: 1-3 lower, stronger US dollar lets prices drift lower, weak crude and corn prices do not help, thoughts there is still time for the crop to recover puts pressure on prices (November last trade 15.89 ½)

Corn: 4-6 lower, profit taking and weak demand let prices drift lower (Sept last trade 7.74 ¾)

Sunflowers: 5-10 lower, bean oil off with soybeans, general weakness hits markets today

Canola: 15-20 lower, futures relax with US soybean complex

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

Yesterday:

The best way I heard wheat trade described yesterday was "erratic" and that was most definitely the case. Wheat markets traded on both sides of unchanged most of the session - posting both double digit gains and losses. Spring wheat decided to settle the day three cents higher and hard red winter wheat was up nine cents for the day. Soybeans were under pressure due to ideas that there is still time for the crop to recover despite unfavorable forecasts. Cash prices finished the day unchanged. Corn also struggled yesterday after trading mostly higher for the day but well off its early session highs. Cash corn prices finished the day a penny lower. Sunflowers lost 20 cents yesterday but it was quiet in the flax and canola markets. Durum continues to lag behind, not wanting to follow wheat prices higher and stuck at unchanged yesterday. Durum movement in our area has picked up substantially over the past few weeks.

Today:

It looks like grain markets are taking a bit of a breather today as we're seeing losses of about a nickel across the board. Outside markets are unfavorable as the US dollar is higher and crude prices have turned from lower to only marginally higher this morning. Reports that this is the biggest drought in the US since 1937 keep grain markets supported but for now we're seeing prices relax due to some showers across the Midwest last night and this morning. No, it isn't enough to erase drought concerns by any means, but it could be a start to helping this soybean crop recover some of what it has lost in some growing areas. Corn prices are off about four cents, as are soybeans. Minneapolis spring wheat is showing strength relative to the other wheat markets and hard red winter wheat is about four cents lower. Canola futures are off their lows but still about $5 Canadian lower.

Reports of new crop spring wheat from South Dakota hitting the spot market only add pressure to spring wheat basis as demand remains week and the market is getting more supply than it needs. Rapid hard red winter wheat harvest keeps pressure on futures but demand remains fairly firm in that market which keeps cash prices supported. There are many supportive global fundamental factors that can justify higher prices in the wheat markets. First off, talk that Russia will cut its export program short this year continues. This means the US could pick up additional demand from former Russian customers. Also , Kazakhstan could have a crop that is nearly 50% smaller than what was produced last year. Rains to Europe are slowing harvest and could potentially hurt crop quality and yield. Western Australia looks to produce nearly 30% less wheat than it did last year. All these factors are encouraging to the US market and spur hopes that demand could pick up as we move through this marketing year. For now, though, spring wheat demand remains shaky and basis values look to crumble further.

A stronger US dollar has spurred some selling in the soybean market this morning. However, as I write prices are nearing unchanged and it would not surprise me at all if soybean futures found themselves in higher territory at some point today. As I mentioned above, there are ideas that July/August rains could turn around the state of the US soybean crop and conditions could improve completely. For now, though, futures are feeling overbought and that has things drifting lower and vulnerable to liquidation as funds sell their bought futures contracts. Concern about global supply and demand will continue to play a huge roll in soybean prices as well. It seems demand has not yet shut off at these higher prices.

Corn futures are off this morning as they take a breather and profit taking hits the markets. Concerns about demand may be beginning to surface but the market still seems to be largely shaking off what higher prices have done to our demand. There are rumors around that China may have cancelled some shipments - if true, we could see some negative price action occur. Additionally - I have heard that some ethanol plants are not taking on new corn purchases and are taking delivery of contracted corn only as prices are just getting too high and are substantially cutting into margin. Ideas that the US crop is at 136 bushels per acre of less will continue to keep prices supported as we move forward. This estimate is 10 bushels per acre lower than the current USDA yield estimate. Harvested acres are also thought to be shrinking as reports of growers mowing over drought stricken corn fields continue to surface.

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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