Linn Group Morning Corn Comment

CHICAGO - Aug 2/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Corn market yesterday started under pressure as we saw a lack
of positive movement after what many traders considered positive news in the
deterioration of the crop as released by the USDA report Monday after the
close, but the market did come back and close higher.  Different analysts
are coming out with yield estimates, so that will play into market action.
As I mentioned yesterday, talking to different guys across the country,
farmers in the East are as bullish and happy as farmers in the West are
bearish and depressed after each has been out in his own fields and
different fields in their area.  Weather breaks today in the Midwest, but
extended forecasts showing hot/dry coming back but the effect on the corn
will be to limit yield potential in corn in the ear-filling stage.  Weather
has bigger effect on beans this time of the year.

Big talk at the CBOT trade was the beginning of a new era as the grain
markets started trading side-by-side, electronic vs. pit.  After looking at
volume numbers, corn accounted for app. 60% of the overall electronic volume
during the day, but only 11% of the overall corn volume.  CBOT views this as
very positive for the first day with the bid/ask a ¼ tick wide in the front
months with good size on the bid/ask.  Will be interesting to see if these
number build or if it stays the same.  Big corn option trade had on firm
selling 6,000 sep 240 calls, with the same customer estimated to be short
20,000 of the 240 straddles.  As one veteran corn option trader said, this
is a pretty aggressive trade with a still unknown crop size leaving them
open to getting very hurt on a rally.  Even though it seems like it will be
difficult for the corn market to rally, the market seems to always come back
and bite trades and/or traders that try and get overly aggressive and think
they are smarter than the market.

ECBOT corn market was higher overnight with traders talking about a
technical bounce and some short covering.  As I said earlier, analysts are
releasing yield estimates and many are coming in below 150 bu per acre when
some of these same analysts were 155 bu per acre a month ago.  This will
make some traders very nervous about carrying short positions especially
with the domestic and export demand very strong and likely remaining very
strong into the future.  Weekly export figures to be release tomorrow
morning and traders will be looking to see if they beat estimates again.


Make sure you are checking the progress at www.cropscout.com


ECBOT market higher overnight with Dec closing 2 ¾ higher

Overnight News:

-- 6-10 day forecast shows above normal temps, below normal precip
-- CIF corn was up 2 with Aug +50 to +53
-- Volume was 193,958 (25,231 eCBOT day), with open interest up 4.6 to
1399.2
-- Crude up 40 points, Gold up $3.5, dollar stronger against most
currencies.


TREND:

Mpls and KC wheat both suffered the long liquidation today. No new bullish
news to support those markets. Chicago benefited from inter-market spread
liquidation.
Corn sold off early, trading a little negative to lack of positive price
reaction to crop deterioration. Demand remains red hot, both domestic and
export, but the overwhelming driving force was again the liquidation early.
The reversal hints that the markets may have trouble going lower, but may
also have problems extending the rally as well.
The soy complex suffered with meal into new contract lows again. Oil will
not break far, impetus on a further rally by strong Chinese domestic values
and a palm oil market that has rallied within $20 to $25 within South
American soy oil.
Seasonal bottoming action in early August can often times be a very strong
influence on flat price. The longer term weather forecast is back to very
threatening to crops, especially soybeans. Markets will respond positively
if short term rain forecasts are reduced again tomorrow.



If you have any questions or want to discuss specific trade recommendations,
contact me directly.

Jim Riley
Linn Group
877-787-6278
jriley@linngroup.com
www.linngroup.com/

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