Linn Group Morning Corn Comment

CHICAGO - Aug 3/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Corn was 3% higher yesterday on fears that the hot weather
moving across the Midwest the last 3-5 days will do some damage to the corn
yields and may threaten a crop that was considered excellent and a crop that
needs to be excellent because of the demand.  Traders keep reminding clients
that this is a demand market, not a weather market.  The hot weather has
renewed interest that corn will not meet maximum yield potential which many
traders felt was a given.  Fund activity was light, buying 4,000 contracts,
but volume was large, almost 250,000 contracts trading, with 30% trading on
eCBOT which includes both night and day session.  Analysts are starting to
release their crop estimates in anticipation of the USDA estimate on Aug
11th.  Rumor on the trading floor is that analysts will be lower than
expected helping to support the corn market.

ECBOT market was lower overnight as we saw the corn market come off
yesterday's rally a little as rain moved across part of the Midwest
overnight.  Corn market opened lower and really just stayed all night, but
did close off the lows.  FC Stone released their production estimate at 151
bpa which was above the whisper number on the floor yesterday with some
traders saying they thought the number would come in at 145-149 bpa.  This
bigger than expected number also probably pushed the corn lower overnight,
especially with Informa releasing numbers tomorrow morning.  Many traders in
the markets, for better or worse, look at Informa numbers to be a good
indicator of the crop production.  Export sales were very strong at almost
double the estimate combined, but FC Stone crop estimate is bearish and many
traders this morning will now look for the Informa number to be bearish as
well.  Weather forecast by the private's is considered bearish, but NOAA
forecast remains bullish, but as we have been preaching for the last couple
of weeks, weather in the corn market is secondary.

Opening call : 1 lower

Overnight News:

-- 6-10 day forecast shows above normal temps, below normal precip
-- CIF corn was steady with Aug +50 to +53
-- Volume was 278,500(30% eCBOT) with open interest up 3.9 to 1403.3
-- FC Stone released their crop estimate at 151 bu per acre, putting the
corn crop at 10.887
-- Informa will release their estimates Friday morning
-- Export sales were 1,900,100, estimate was 900,000 - 1,200,000


TREND:

The corn chart has rallied off the lows by 14 cents and is only 2 cents away
from a 50 pct Retracements on the last break. This may be a good place to be
un-long. The fear is always that the market goes forward in reaction to
summer weather but in this case the crop report only a week away should keep
the market in check for the most part. In fact there is a trade here --- buy
corn puts and calls tomorrow and sell them out late Thur next week in front
of the report. There should be a lot of "what if" trades over that period of
time---some fearful of a big reduction in the crop buying calls-and some of
those rascals in the east that think they have yields 10 to 15 bu larger
than the current record buying puts. We can take advantage of both---just
sell them out before we get the report next week---the vol will sell off
hard on the report.



If you have any questions or if you would like 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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