SunPrairie Grain Morning Comment
MINOT - Jul 30/10 - SNS -- Following is the morning comment from SunPrairie Grain, a division of CHS.
Opening Calls:
Wheat: 7-10 higher Russia crop scare continues
Beans: 5-7 higher new crop sales are strong
Corn: 2-4 higher as corn follows the wheat market
Yesterday:
Despite having high US production prospects and a large global cushion
of wheat, the wheat market continued to rally on news of Black Sea
drought. Strong export sales also helped out the wheat market as US
wheat is expected to fill the production void that will come from lower
Black Sea Region production. Corn simply went along for the ride and
gained a few pennies in futures yesterday. Soybeans are finding
continued strength off of strong export sales - especially of new crop.
Farmer selling of soybeans is slow - so end users could have to pay up
to get beans into their hands.
Today:
The wheat market just won't quit! Overseas weather continues to push US
futures prices higher. European futures are reaching new contract highs
yet again today - further allowing US wheat futures to rise. Corn is
along for the ride and following wheat higher - fundamentally that
market doesn't have much reason to rally, either, but since when has
this market actually paid attention to fundamentals? Soybeans are
finding some strength of their own as new crop sales are strong.
Where is the breaking point in this wheat market? European futures are
surging on heat and dryness that is expected to continue in Russia and
Ukraine this coming week. Overnight trade was about a dime higher in
spring wheat September futures. Bruce Sullivan, CHS spring wheat
merchandiser, was in the office yesterday. His contacts in Europe have
said that the drought probably isn't as bad as what the markets are
making it out to be. Headline traders are running away with the news.
Even with all the technology today has to offer it is difficult for us
to get a grasp on just how bad things are over there but like I said
the market is taking the worst case scenario and going with it.
From everything that's going on today it looks like we'll see a higher
open in the wheat market. However the dollar is slightly lower which
could put a cap on things. Also, we need to keep in mind that it's the
end of the month. Fund managers are going to want their portfolios to
show that they're making some money - will they be selling wheat futures
in an effort to take profits? We'll see - but I'm somewhat cautious in
regards to today's opening calls.
The ND, SD, MN wheat tour came to a close. Over 300 fields were surveyed
and spring wheat bushels averaged 46.0 bpa. IN the Devils Lake - Pembina
area 50 bpa yields were found. Harvest is underway in NW Minnesota and
39bpa yields are being reported. Crookston looks like it should be ready
to go here quickly - according to the tour. Analysts were expecting
durum yields to come in at 44 bpa but the tour found 38.4 bpa (versus
36.2 found on last year's tour). Will this help out the durum market?
We've been finding some strength in that market lately but I think
buyers are just trying to cover previous business.
Winter wheat harvest is starting up in our area and I'm sure by next
week it'll be going strong. We've seen a few samples so far and proteins
have been anywhere from 9-13 and TW at a 59 average. There's been some
damage due to scab kernels on a few loads so be sure to keep an eye on
that. Otherwise things are looking pretty good and I'll do my best to
keep you updated on how things are coming in - thanks to Steve in our
lab for putting that all together for us!
The graph below is US wheat production by class - courtesy of Reuters.
For those of you that can't see it I've also attached the link.
http://graphics.thomsonreuters.com/F/07/US_WHTPRD0710.gif
As I mentioned above - corn doesn't have much of a fundamental reason to
be at its current levels. Yes, some fields are dried out and some have
excessive water. This will likely result in a reduced yield in the
August USDA report. Overall the crop is still doing very well. However -
I'm sure the corn market will just follow wheat as weather is not doing
anything exciting right now to tell corn to do otherwise. The soybean
market is finding strength on new crop soybean sales. The dollar has,
over the past few days, been weakening against South American currencies
- giving further reason for buyers' attention to turn to the US for
soybeans. Spillover support from the wheat market is also helping.
The pea market has been all over the place. Plantings in India are ahead
of 2009 with acres up 17.8% from last year. India is a key player in the
yellow pea market and they recently issued a tender to buy 100 TMT of
yellow peas. However - India specified that this shipment needed to be
of either French or Canadian origin. The food aid market continues to be
the big market for peas in the US ...and demand for the US government is
down from last year making it even more difficult to find an outlet for
the commodity.
As always you can reach me at Kayla.Hoffman
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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