Linn Group Morning Corn Comment

CHICAGO - Sep 8/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  JP Morgan made the big splash in the corn market yesterday as
option traders had them closing out positions by buying 15,000 $3.00, $3.10,
and $3.20 calls.  Rumors also were circulating that they purchased 15,000
futures, all through the eCBOT electronic system.  Obviously, both these
trades are very bullish futures.  The buying in the corn market really
started with commercial and ethanol buyers coming into the market and
buying.  We also had some short covering from earlier in the week
contributing to the rise in prices yesterday as well as some traders
squaring positions in anticipation of the release of the USDA report on
Tuesday.  Thursday's action was an excellent example of the corn demand
market as we saw the commercial accounts, especially industrial/ethanol
users come in and buy a lower market, pricing their needs into the future.
Volume was huge with app. 40% traded electronically, and the option trade
was huge.  Funds were net sellers of 4,000 contracts at 11:30 but ended up
buying 2,000 by the end of the day.  We also saw traders bull spreading corn
into the report which is very interesting because we have seen analysts on
both sides of the number with on real consensus on the Sept number coming in
above or below the August number.

eCBOT overnight market was pretty quiet as we saw a 2 ½ range, but only
3,500 contracts traded.  After looking at yesterdays action, you would have
to guess that the big boys squared their positions in anticipation of
Tuesday's crop report.  Export sales this morning, 915,000, were in line
with the estimate of 900,000 to 1,000,000, but I would view the sales as
disappointing as we have seen the export sales beat the estimate just about
every week the last couple of months.  Coupled with the big run up
yesterday, I would expect to see some selling in the corn market today as we
should start a little lower.  I think traders were caught off guard
yesterday with the rally and we saw some short covering as we saw the eCBOT
screen leading the market higher.  We should see a choppy trade today as the
market looks to see if there is any direction and to see if the funds are
back in the market.  Expect more position squaring today as traders prepare
for the Tuesday USDA report.


eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCU6                230^6    0^0                   231^4    230^4
ZCZ6                 245^6    0^0                   247^0    244^4
ZCH7                260^0    0^2                   261^0    258^6
ZCK7                267^4    -0^6                  269^0    267^4


Early Opening Calls:

Top News
**USDA Corn 06/07 Export Sales Net: 913,800 mt
-- Big Corn trade on the  e-CBOT Thursday with 87,065 contracts traded.
There was talk that JPM bought close to 15,000 Corn electronically.
-- Funds were early sellers Thursday but turned buyers late. At 11:00 Funds
were net sellers of 4,000 Corn but ended the day net buyers of 2,000.
--  Average estimates for USDA crop report Tuesday. Corn yield 152.5,
production 10.996; Soybeans yield 41.9, production  3.093. Ending stocks:
Corn  2005/06  2.046   06/07  1.221   Soybeans  2005/06  503    06/07  566
-- Deliveries:  Corn  2,694  ADM put out  672  Term stopped  50
-- Corn spreads: ABN 1,500 CZ/CZ7, Man 1,000 CZ/CZ7, UBS 1,000 CZ/CH, 1,000
CH/CZ.
-- Volume was 242.6, with open interest down 4.4 to 1302.1
-- 6-10 day forecast shows normal temps and precip.
-- Outside markets:  Metals sharply lower again, energies mixed, dollar
stronger against all currencies.

Cash Markets
-- CIF Corn  steady off  2.   Sept. +56 to +57, LH  Sept. +56 to +58, Oct.
+60 to +62, Nov. +60 to +63, Dec. +61 to +65, Jan. +50 to +55, March +51 to
??. NS Corn       Sept. -16      FH Oct. -22  LH Oct. -16  Jan/July +3
Evansville  CSX  -6Z


TREND:

The corn market has reversed on a test of the August lows which should set
up another run at the $2.50 gap area. This leaves the $2.40 level as support
to buy against. Buy a 2-3 cent break and risk the $2.38 level. Look for
problems in the $2.50 to $2.52 range. Liquidate longs there. However,
closing that gap would project a run to retracements at $2.59. Next week's
Sept. expiration could add some additional strength to this corn market with
the $2.30 to $2.40 area as our new support shelf

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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