Linn Group Morning Corn Comment

CHICAGO - Aug 14/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Well, we saw the corn market sell off like we haven't seen in
a long time.  Volume was huge, estimated at 370,000 contracts, with funds
selling 30,000 contracts.  This interesting thing is that open interest was
actually up almost 10,000 contracts.  New short?  No fund liquidation?  That
is what traders are speculating this morning, so with funds still long
160,000 contracts, we could still see some very powerful selling.  Now that
the USDA report has been released, what is the market going to do now.  The
headline number in the corn production USDA report was the 200 mil bu of
corn above expectations.  Demand in the long term remains very strong, but
it looks like we are going to see a very large corn crop, only getting
better with near perfect August weather patterns, so near term, traders
think the market is going to try and test the summer lows.  It is still
amazing how, every year, no matter how big the demand, corn turns on a dime
and punishes the longs in such a short time.  Technicians looking for Sep
corn to bottom in the 210-220 area, so that would point to some more
downside potential.

eCBOT market saw huge volume last night, 30,000 contracts, as we continued
to see corn liquidation. Corn market opened lower overnight, then grinded
lower, only to recover and then sell off at the end.  Traders this morning
anticipate more selling in the corn market as traders will continue to
liquidate positions and surprisingly, new shorts will enter the corn market.
There seems little reason to buy corn in the short term, with every trader
saying this morning that they want to sell rallies.  Some talk of LDP's
coming back into play, especially out west.  It will be very interesting to
watch corn and if it continues to sell off and what happens to open
interest.  We all know that the index funds are not going to be selling and
if open interest continues to grow, that is new shorts.

eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCU6                221^2    -3^4                  224^6    220^4
ZCZ6                 238^2    -3^4                  241^6    237^2
ZCH7                252^4    -4^2                  257^0    252^2
ZCK7                262^2    -3^2                  265^4    262^2

Early Opening Calls: 3 lower

Top News:
Exports: Israel bought 35,000 mt. US Corn.
-- Even though Funds liquidated 30,00 contracts of Corn Friday the
preliminary report shows Corn open interest rose  9,108 contracts.
-- The Commitment of Traders report with Options as of  August 8 shows
Funds:
Corn   Long  195,118  off  7,801
Soybeans  Short  45,210  up  10,079
Wheat  Long  14,510  up  451
Meal  Short  38,161  up 3,057
Oil  Long  65,146  off  1,420
-- Funds hit the sell button in Corn Friday selling 30,000 contracts on the
day. Funds also Sold 5,500 Soybeans, 4,000 Wheat, 1,500 Meal, 12,000 Oil.
-- Gold trading lower this morning  $624.10  off   $9.40
-- Crude Oil trading lower $73.00  off   $1.35
-- 6-10 day forecast shows above normal temps, normal precip
-- Volume was 371.9, with open interest up 9.1 to 1352.9

Cash Markets
-- CIF Corn up 2 .  LH Aug. +64 to +??,  Sept. +69 to +74,LH  Sept. +69 to
+??, Oct. +62 to +68, Nov. +60 to +??, Dec. +62 to +65, Jan. +51 to +55. NS
Corn Sept. -18  FH Oct. -32  LH Oct. -28  Dec. +2  Evansville  CSX  -7

TREND:

Hope to get bearish corn production est in the report. Could go a long way
toward bottoming this phase of the corn market. Did I say that last night?
Still feel it. This corn market has set in motion a big move right in front
of us. If it does not bounce right back out of here, could go another 10 to
15 cents lower?

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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