SunPrairie Grain Morning Comment

MINOT - Jul 19/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Morning Outlook as of 8:50 AM CDT:

Wheat: 23-30 higher, markets skyrocket, demand decent, weather concerns main price driver (Mpls Sept last trade 10.25 ¾, KC Sept 9.35 ½)

Soybeans: 50-55 higher, markets break through to new contract highs, surpassing $17 on August futures (November last trade 16.66)

Corn: 7-10 higher, September corn futures pass $8 mark, pulls markets higher, demand may limit gains

Sunflowers: 5-10 higher, bean oil stronger with surge in soybeans and crude oil

Canola: 15-20 higher, market recovers after quiet trade in yesterday's session, crude and soybeans help

Today:

Export sales for the corn and soybean markets were well below what was estimated by market participants. Demand is obviously lagging as futures continue to soar higher but today these markets don't care. It remains all about weather. Even though some rains have fallen over the Midwest and more is in the forecast - futures are higher in more of a technical move. We broke through key futures prices ($17 for soybeans and $8 for corn) and that has the board surging higher. Right now September corn is up 16 cents and soybeans are up 62 cents on the August contract. The US dollar was lower but has turned a bit higher for now. Crude prices are up about $1.60/barrel at the moment which could also be supporting the grain markets a bit. Wheat had better than expected export sales for the week and weather also works to keep prices supported. The drought is reportedly impacting 61% of the US growing area - and that number increases daily.

Export sales for wheat were at 589.2 thousand metric MT(TMT) which is above estimates of 300-500 TMT. Export sales numbers were also more than the market needed to stay on pace with current USDA projections. Drought conditions in the US and in the Black Sea region also work to keep prices elevated. Dryness in Australia is also a concern. Global production worries keep this market excited and will continue to do so. Production issues in Australia and Russia, two of our big competitors in the global export arena, spurs hopes that US exports will pick up as we move forward. Also, news that Argentina seeded 22% less wheat acres is encouraging as well. However, futures are really feeling overbought and we could see liquidation at any point. Spring wheat futures have now broken through a key resistance point of $10 and we see several contracts trading at that mark or higher.

Supply concerns are boosting soybean prices sharply higher again this morning. These markets just will not quit. But there is a crop to ration and that is what we see happening in these markets lately. It seems we are doing a pretty good job, though, as demand for old crop was pretty quiet. Overall, though, export sales for the week were decent at 407.6 TMT, just above estimates of 400-800 TMT. Other oilseeds look to trade higher with the rising soybean complex. Bean oil and crude are stronger which also bodes well for flowers, flax and canola.

The corn market saw the lowest weekly ethanol production numbers this week since they started being recorded back in 2010. Also, old crop export demand is pitiful. Sales of 31.9 TMT were reported for old crop corn sales - new crop did a little better at 148.8 TMT. That's a total of 180.7 TMT for the week - which is still pretty sad - and the market was expecting to see sales of 200-550 TMT. Some significant rains are expected to fall across areas of Indiana, Ohio and Kentucky. However, it seems that much of the crop is beyond repair at this point and new rains may not do much to help the crop. Some decent rainfall did fall to areas of Minnesota and Iowa which will likely help boost yield potential in those areas. As with soybeans, the corn market is rationing out its supply but demand is obviously being scared away pretty quickly. Both export sales and ethanol production were poor this week and we will likely see demand continue to disappear if grains keep trading higher.

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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