SunPrairie Grain Morning Comment

MINOT - Jul 23/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Morning Outlook as of 8:25 AM CDT:

Wheat: 17-22 lower, strong selling pressure and a higher US dollar push wheat prices down despite global production concerns (Mpls Sept last trade 10.14, KC Sept 9.15)

Soybeans: 38-40 lower, some rain goes through Midwest but this correction is all due to long liquidation - long positions are being sold (November last trade 16.45)

Corn: 16-18 lower, demand stinks and the market is finally realizing that - no changes in weather outlook so crop continues to get damaged by heat and dryness (Dec last trade 7.80)

Sunflowers: 40-50 lower, soybean oil gets hit hard with energy and equity markets as selling pressure hits everything today

Canola: 50-60 lower, front end contracts much lower in sympathy with the US markets and energies futures

Friday:

The US dollar was higher but weather dominated the markets and we saw grain prices finish higher for the week. Corn and soybean futures were stronger on poor weather across US growing areas as forecasts called for continued hot, dry weather. Corn finished the day two cents higher, pushing prices up to $7.10/bushel. Soybeans were up a whopping 44 cents for the day, getting prices close to that $16 mark. Canola, flax and sunflowers all saw double digit gains as they traded higher with the soybean complex. Wheat followed strength in the row crops but Black Sea Region production also worked to push prices higher.

Today:

Yuck. It seems we are seeing our correction this morning. Prices are lower for everything except for the US dollar, which is extremely higher on concerns out of Europe and indications that Chinese growth is slowing. Metals and energies markets are also lower - crude prices are getting hammered and are $3.35/barrel lower at the moment. Broad based selling has hit the grain markets and corn is down 21, beans 40, spring wheat 20 and hard red winter wheat is down 27 cents. Crop conditions are expected to decline for corn and soybeans and wheat is seeing a lot of global production concerns. However, demand has been pretty scared off for the time being and grain futures finally seem to be noticing.

Well, hard red winter wheat harvest has finally begun in our area. So far, everything has looked great! Mohall has been taking quite a bit in and yields are looking good with some ranging from 75 and up to 110 bushels per acre (yes, you're reading that correctly!) - combines are rolling at all of two miles per hour. Protein has varied from 10.5-13.4 with much of it averaging on the higher side. Test weight is good at 61+ pounds and for the most part it has been fairly dry. The best news, though, is that VOM is very, very low if not nonexistent! We're expecting harvest progress to pick up substantially this week as fields dry down and I will keep you posted on what we're seeing for quality. Prices are lower not because of North Dakota harvest, though. In the hard red winter wheat world, North Dakota is not yet considered a key player. Prices are lower this morning due to strong fund selling as they have been buying up prices quite heavily over the past few weeks. Global production problems remain a huge concern, though, as the Black Sea Region and Australia are experiencing production issues due to unfavorable weather. European wheat prices are lower this morning as well as weather turns favorable there - however the European crop likely will not be enough to make up for yield reductions in the Black Sea.

Some rain showers fell throughout the Midwest over the weekend which may have helped out some soybean fields that need the moisture. The market is expecting to see a reduction in crop condition ratings. If ratings fall less than expected, then that will be viewed as unfavorable as well. For the long term, global supply and demand seems supportive for prices but nearby futures were feeling overbought and that's why we're seeing lower prices today. Ideas that US yield could be well below 40 bushels per acre creates further concerns about supply. In other news, though, India is getting less rain than needed to support their crop. Canola futures are correcting with soybeans and crude prices.

Corn conditions are expected to decline by another 3-5% in this afternoon's USDA crop conditions and ratings reports. However, prices have gotten high enough to scare off demand and the market is finally starting to take notice. There are reports of US buyers going to South America as a source for corn as Brazilian prices are far lower than US prices. Demand for US corn has slowed and prices are dropping as a result in order to try and get some of that demand to come back. In the overnight session, December corn futures hit the $8.00 mark. When that happened, a whole bunch of sell orders triggered and has created a massive selloff in corn futures, which has worked to pull prices down as well. Weather forecasts have not changed, though, and conditions look to remain hot and dry through this week, adding further damage to the crop.

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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