SunPrairie Grain Morning Comment

MINOT - Aug 2/12 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.

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Morning Outlook as of 8:45 AM CDT:

Wheat: 3-10 lower, spring wheat is down only 3 cents but winter wheat markets are getting hit pretty hard, taking pressure from corn and soybean markets (Mpls Sept last trade 9.34 ½, KC Sept 8.73 ¼)

Soybeans: 20-22 lower, increased chances of moisture and liquidation of long positions (Nov last trade 16.07 ¼)

Corn: 7-10 lower, export sales poor for the week, take weakness from corn and wheat markets (Dec last trade 7.90 ½)

Sunflowers: 5-10 lower, bean oil and crude struggle this morning, putting pressure on the sunflower market

Canola: 20-30 lower, futures sharply lower this morning with decent crop conditions and a selloff happening in the soybean market

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Yesterday:

Grains saw another slide in yesterday's session as a lack of fresh, favorable news let prices drift lower. Additionally, the corn market seems to finally be realizing that recent price levels have completely scared off demand. Lower wheat and soybean markets did not bode well for stronger corn prices yesterday, either. Soybeans finished the day down 12 cents as increased chances of precipitation have many believing that the US crop could still recover. Wheat did pretty poorly yesterday. Spring wheat saw another basis decline of a dime and futures fell off substantially too - which worked to push cash prices down another 28 cents. Hard red winter wheat prices fell off eight cents on the day. Canola prices were sharply lower yesterday which I guess is not much of a surprise considering the strong close that came out of nowhere on Tuesday. Flax lost 20 cents and sunflowers gained as bids rolled to August.

Today:

We are lower yet again this morning. Overnight trade saw grains posting double digit gains but that has since faded and now many contracts are posting double digit losses. Spring wheat, though, seems to be holding its own and is down only eight cents whereas winter wheat is down 13 cents. Wheat seems to be pressured by favorable weather to Australia and falling row crops. Soybeans are sharply lower this morning with the November contract down about 20 cents right now as US weather seems supportive for crop development. Corn is also losing out this morning, down about a dime, as export sales are dismal and crude prices are getting hammered. The US dollar is higher this morning as well which does not help much either.

Wheat export sales for the week were at the high end of estimates of 350-650 thousand metric MT(TMT) at 520 TMT. News that rains are falling to Australia, providing some relief to dry weather and crops, has the wheat markets on edge this morning. European and US harvest has wheat moving to the pipelines quite quickly. US domestic (milling) demand remains fairly quiet and millers are happy because they're getting the grain the need to keep grinding. The railroad has been running well so far and nobody is really in a crunch for cars, which means product is getting moved quickly and basis values are under pressure. China production is reportedly going to be lower this year, which will constrict their feed wheat supplies. This bit of news is more favorable for the feed market than the milling wheat markets.

Soybeans are falling off with moisture prospects and strong liquidation. It is going to take some fresh favorable news to get prices to trade higher again and get the bullish sentiment back into the market. Export sales for the week were pretty dismal at 246 TMT, below estimates of 380-605 TMT. Brazilian exports were down in the month of July. Exports from Brazil are typically the strongest from July-September. However, Brazil had a smaller crop this year and an early harvest which push the export period back and is also limiting quantities. Canola futures are sagging again this morning as soybean futures are off and crude prices are lower. We could also be seeing some commercial movement as well that is putting added pressure on canola futures.

News that several members of congress are putting pressure on the EPA to decrease their renewable fuels standard due to this year's drought hit the market yesterday. Over 120 members of congress are part of the movement which would decrease corn used for ethanol requirements. This news is not really particularly favorable for corn prices. If the RFS for corn is decreased, supplies of corn will increase for other uses and prices could be pressured a bit. This will also cut off demand for corn to ethanol plants as well. Export sales for the week were not expected to be much with estimates ranging from 0-250 TMT and sales coming in at 201 TMT. Still very poor export sales but it is mildly encouraging that we were at the high end of estimates. China is reportedly going to sell off some of its state reserves in an effort to decrease domestic prices. Additionally, China is expecting to have a good crop this year which may impact their import demand - but as I mentioned above that will also depend on how their feed wheat crop does. Ukrainian corn exports are expected to fall off a bit this year, decreasing global corn export competition, as production is struggling this year.

Kayla Burkhart

Broker/Procurement

SunPrairie Grain

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1600 27th St SE | Minot, ND 58701

P 701.857.9322 | F 701.839.5515 | C 701.720.4682

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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