Linn Group Morning Corn Comment

CHICAGO - Aug 16/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Corn ended flat to firm today with the market attempting to
find a bottom and possibly start to consolidate as the corn market made 6
month lows after the bearish crop report on Friday and the near perfect
finishing conditions most of the corn belt has seen the last couple of
weeks.  These are the dog days of August when many traders are on vacation,
the crops look great, and the weather continues to be excellent.  Traders
said this morning said that good demand for corn, higher basis levels and
lack of farmer selling is helping stem the flood of selling that has come
into the corn market.  Traders also pointed to the unexpected crop progress
report that came in unchanged while many traders were expecting a 1-3%
increase in the good/excellent.  Fund selling was very light, 1,500
contracts, as compared to recent days.  As the days go by, weather becomes
less and less of a factor, but traders still look at the weather forecast
everyday.

eCBOT night market closed almost 3 higher on decent volume, app. 8,500
contracts.  Traders will point to a couple of reasons for the bounce last
night as the Sep contract stayed below most moving averages and technicians
are looking for a short covering technical bounce as many traders still look
at corn as oversold.  Exports remain very good as we saw So. Korea in buying
165,000 tones of US corn overnight again and China Meteorological bureau is
reporting that south western China is experiencing its worst drought in 50
years and officials at the Dallian exchange say corn production will
probably fall due to this dryness.  Bulls will point to this news as another
sign that China will be in to buy US corn this year and for sure in 2007.
The corn market looks to have found a bottom for now and we would expect the
market to find support.  Domestic demand for corn is only to get stronger
and it seems they announce another ethanol plant being built here in the US
almost daily.  While August rains are better for beans than corn, traders
will point back to last year when the corn market improved dramatically in
August, but remember, August rains will only fill the kernels better, so if
there isn't any kernels, like in the western corn belt, the August rains
won't do much.

We will call corn 2-3 higher this morning, but look for the market to sell
any attempt to rally the market very much.  Traders will look for strong
weekly exports tomorrow morning to helps support the market.


eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCU6                224^6    2^6                   225^2    222^0
ZCZ6                 241^2    2^6                   242^0    238^4
ZCH7                256^4    3^2                   256^4    253^4
ZCK7                263^0    0^0                   263^0    263^0

Early Opening Calls: 2-3 higher

Top News:

-- Chinese Soybean, Meal, Oil and Corn futures closed higher.
-- Exports:  South Korea bought  165,000 mt. US Corn for Nov.
-- Cash Corn market on fire as CIF values jumped 3 to 5 cents, Rail values
up 3 to 5. Processor and River markets up 2 to 5. This all comes as export
demand continues strong, farm sales are very slow, spreads and cash carries
say hold on.  This is all happening at the end of the crop year when we have
a 2.0 bil.bu.   What will happen next year when ending stocks will be 800
mil to 1.0 bil less?
-- China's meteorological bureau reports that southwestern China is
experiencing the worst drought in 50 years.  Sources at the Dallian exchange
say Corn production will probably fall due to the dryness in the southwest
region.
-- Corn volume slowed Tuesday with the pit trading 119,817 contracts while
e-CBOT traded 43,540.  The preliminary report shows Corn open interest off
8,650.
-- Fund traded slowed from recent days. Funds  sold 1,500 Corn,  1,000
Soybeans, 1,100 Meal.  Bought 500 Wheat, 1,100 Oil.
-- Corn spreads: ABN 1,000 CZ/CU, Tenco 500 CU/CZ, JPM 800 CU/CZ, Citi 800
CU/CZ.
-- 6-10 day forecast shows normal to above temps, normal to below precip
-- Volume was 171.7(43.5 eCBOT) with open interest down 8.6 to 1342.4
-- Outside markets:  metals higher, energies mixed, dollar lower against all
currencies, treasury and stocks stronger.

Cash Markets
-- CIF Corn 3 to 5 .  LH Aug. +70 to +??,  Sept. +74 to +78,LH  Sept. +77 to
+80, Oct. +65 to +68, Nov. +66 to +??, Dec. +66 to +69, Jan. +52 to +55. NS
Corn  Sept. -15 FH Oct. -30  LH Oct. -25  Jan/July -2  Evansville  CSX  -7

TREND:

The best you can say is the market quit going down today.

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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