Linn Group Morning Corn Comment

CHICAGO - Aug 17/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  The corn market closed weaker on spillover from the beans and
wheat as we saw the market unable to hold the rally as traders continue to
look back at the USDA report last week and the excellent weather conditions.
The corn market traded firmer most of the day as demand remained strong,
firm cash basis and lack of any farmer selling.  Technicians also pointed to
over sold conditions and a technical rebound.  Traders continue to talk
about big supplies today, but as the demand for ethanol, exports and feed
increases in later years, supplies will dwindle creating a very aggressive
pricing scenario.  The market has seemed to really quiet down the last
couple of days after the USDA report as many traders now know that we have a
large crop and will wait to see how large, while users will continue to try
and hedge their corn needs for the future.  Funds were quiet again selling
only 1,500 contracts.

eCBOT market saw decent volume overnight, app. 8,500, as the market finished
up over 2 cents.  Traders point to the market bouncing a little off of the
late sell off yesterday following wheat and beans and expectations of
stronger export numbers this morning.  Well, the market was rewarded with
larger than expected export numbers with current mktg yr sales at 575,400
tones and next mktg yr sales at 1,030,000 tones for a total of app. 1.6 mil
tones.  This was above the estimate of 700,000 to 1 mil tones.  Market now
seeing any new news this morning and continue to look for the corn market to
rally and find sellers and come back, only to find buyers, mostly users,
pricing their needs.  Many users are looking for ways to lock up their needs
as far forward as they can because deferred prices are staying up and the
fronts are falling.  As one veteran trader said this morning, at this time
of the year, it is tough to buy strength, but the market has to buy acres
because of future demand and the only way to buy acres is by price.  As the
price of the deferred corn rises, farmers will plant more corn acres.

Look for a higher opening today on the export sales with the corn market
running into selling pressure and ending unchanged to a little lower.

eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCU6                223^6    2^2                   223^6    221^0
ZCZ6                 240^0    2^0                   240^2    237^4
ZCH7                254^4    2^0                   255^0    252^2
ZCK7                262^0    0^0                   262^2    261^4

Early Opening Calls: 1-2 higher

Top News
-- Corn:  Net sales of 575,400 MT; Net sales of 1,030,100 MT for delivery in
2006/07
-- EU grain analyst Strategie Grains  estimated EU grain production at 249.0
mmt. down 10.5 mmt. from it's last estimate and 3% below last years crop. EU
soft Wheat production estimated at 109.9 mmt. down 5.8 mmt. From last month
and 4% below last
year.  EU Corn production 46.5 mmt. doan 2.0 mmt  from last month and 7$
below last year.
-- Biggest Fund trade in Wheat Wednesday selling 4,500 contracts. Funds also
Sold 1,500 Corn, 1,500 Soybeans, 1,000 oil and 600 Meal.
-- Corn spreads: Fimat 1,000 CU/CZ, 1,000 CZ/CH, ABN 1,000 CZ/CU, Rand 1,000
CU/CH.
-- 6-10 day forecast shows normal temps, normal to above precip
-- Volume was 169.8, with open interest up 4.6 to 1347.2
-- Outside markets:  crude is down over $1, metals slightly higher and
dollar slightly lower against all currencies.

Cash Markets
-- CIF Corn up 2. LH Aug. +70 to +74,  Sept. +76 to +78,LH  Sept. +79 to
+80, Oct. +67 to +68, Nov. +67 to +69, Dec. +67 to +69, Jan. +52 to +55. NS
Corn Sept. -15 FH Oct. -30  LH Oct. -25  Jan/July -2  Evansville  CSX +27

TREND:

The best you can say is the market quit going down today but had no rally
power. The markets with a story tried to firm---wheat and corn.

Inability to leave weakness behind is a bad signal for corn. Look for this
market to chop. Strong cash markets are okay to tighten spreads some but
deliveries remain a long way from the cash and still make the best sale for
cash houses. Basis can gain even more as the big margins in domestic use
fight with the exporter. Right now the exporter is pulling supplies away
from the interior as freight relaxed a day or two and the export basis shot
up. Harvest is right around the corner and it is very unlikely the corn
basis gains too much more. Sell the 1 to 2 cent gains in the corn spreads
U/Z and Z/H they remain dead duck in my book. Past Mch is a different story.
Tight supplies can be real then

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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