Linn Group Morning Corn Comment

CHICAGO - Aug 4/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  The corn market was lower yesterday on lighter volume and
rains that rolled across the Midwest.  As the old saying goes, rain makes
grain.  FC Stone crop production estimate was above the expectations and
probably accounted for some of the selling and liquidation yesterday.
Traders had rallied the corn market on Wednesday in anticipation of lower
numbers by the analysts, so when FC Stone came in better, anticipation was
that other analysts would come in better.  Traders continue to look at the
weather across the Midwest even though corn is past its critical stages.
Funds sold 6,000 contracts as we saw liquidation and open interest down over
13,000 contracts.  The corn market did find support lower on the much bigger
export sales released before the opening yesterday as we continue to see
export sales very strong, adding to the pressure of the corn market in the
middle of a demand market.

ECBOT volume overnight was average, app 10,000 contracts, but we saw the
market close 3 ½ higher.  Traders look at a couple of factors on the rally
overnight as we saw very little new news.  Many traders point to 6-10 day
weather forecast as being supportive of the market even though every farmer
will tell you corn is past its critical stage.  Some of the traders also
pointed to the anticipation of bullish number by Informa as part of the
reason for corn was 3 ½ higher overnight.  Traders are starting to get a
little worried about soil moisture levels.  One veteran trader also pointed
to disappointing coverage and amounts on the rains that swept across the
Midwest the last 2 days.  It rained here in Chicago putting a many traders
in a negative mood toward grains, but they don't grow many crops here in
Chicago.

Don't forget to check out the progress of the crop tour at
www.cropscount.com  .

Opening call this morning will be higher, but probably not 3 cents higher.


Overnight News:

-- 6-10 day forecast shows above normal temps, below normal precip
-- Volume was 140.4(40.8 eCBOT), with open interest down 13.5 to 1390.0
-- CIF corn was up 1 to 3 with Aug +50 to +53
-- So. Korea bot 195,000 corn overnight with 30,000 earmarked for China.
1st Chinese purchase of US corn since April.
-- Metals much higher this morning, dollar weaker against all currencies,
energies a little lower/unchanged
-- Informa crop production was 150.8 bpa, 10.857 bil bu

TREND:

The corn market got the correction expected---now look for it to trade
sideways to slightly higher into the crop report.

The KC/Chi and Mpls/Chi spreads also got the boost expected. This continues
to be a trade that has a lot of upside potential and the recent break has
taken away much of the risk---not comfortable for those still long it---but
worst should now be over. KC length continues a potential problem but those
still there show they have a lot of staying power. Any further rally in KC
wheat should be cash led---watch for basis gains over coming weeks. Eastern
soft red basis levels continue soft with many now at $1.00 under futures.

The bean complex becomes a weather market only for the next few weeks. Not
sure how to rectify the private and NWS forecast? Means volatility.


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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