Linn Group Morning Corn Comment

CHICAGO - Sep 12/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  The corn market yesterday felt the pressure of the outside
markets as we saw it close almost 1% down, in front of a USDA report, as we
saw the energies and the metals significantly lower.  We saw this same
situation this winter and spring when there little to no new news and the
grain markets reacted to the outside markets.  The market also had some
final position jockeying before the release of the USDA report.  The only
positive from the down move in corn was the market did find some support
when it finished almost 4 cents off the lows.  We attributed the sell off to
some speculators trimming positions in anticipation of the USDA report and
the huge crop on the horizon.  Weather was a mixed bag as we saw the bull
camp point out that rains will delay harvest and put some pressure on the
near term corn and the bear camp said that the rain will add tonnage, thus
increasing the size of the crop.  Bottom line was the market was pretty
quiet and waiting for the USDA report even with funds selling 4,000
contracts, the market came back and made new highs by the end of the day.

eCBOT overnight market was fairly active, 10,748, as we saw the market react
to crop progress report after the close and final positioning going on
before the USDA report was released this morning.  Well, as we said in the
office this morning, the only this bullish about the USDA report is that it
is finally released.  Corn production was estimated between 10.486-11.188
and the USDA Sept estimate was 11.114 with a yield of 154.7 with a reduction
of 300 acres.  Both the production and the yield numbers are considered
bearish.  The 11.114 bil bu would be the 2nd largest crop in history and if
history is an indicator, this number will only grow bigger in later reports.
Carryout numbers for 05/06 were a little lower than analysts estimate and
06/07 were right at analysts average.  It should be interesting to see how
corn reacts this morning after the report.  The calls this morning will be
lower, probably as much as 5 lower on the opening, but I expect we will find
buying if we get that much lower as we will get close to contract lows in
the Dec.  Remember, funds are long 126,000 contracts and there will be some
liquidation after the USDA report, but commercials, ethanol producers, and
exporters should be there to support the market.   Should be a very
interesting day and wouldn't be surprised with corn closing higher or makes
new highs toward the end of the day.  I still think you want to be long corn
long term and the CN07/CZ07 spread is an excellent way to be long without
having to worry about flat price into harvest and crop reports.


eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCU6                228^6    -3^0                  232^2    225^4
ZCZ6                 243^4    -2^4                  247^0    239^6
ZCH7                257^2    -2^6                  261^0    254^0
ZCK7                265^2    -3^0                  269^0    262^4



Early Opening Calls: lower 3 to 5 cents

Top News
**US Sept. Corn 06/07 Crop Prod: 11.114 bln bu.; est. 11.00; Aug Rpt 10.976
**US Sept. Corn Yield: 154.7 bpa; est. 152.5 bpa; Aug Rpt 152.2 bpa
**US Sept. Corn 06/07 Carryout: 1.22 bln bu. ; est. 1.21; Aug Rpt 1.232
**World 06/07 Corn Carryout: 92.3 mmt; Aug Rpt 93.0

-- The USDA progress report this week shows Corn rated 59% good to excellent
vs. 59% last week  and 51% last year. Corn harvest is 6% complete vs. 6%
last year and 6% average.   Soybeans were rated 60% good to excellent vs.
59% last week and  54% last year.  Dropping leaves 27% vs. 34% last year and
27% average. Don't think the conditions reports mean a whole lot at this
stage of the crop. The Soybean conditions may have one more week of
relevance but after that harvest progress will be the main number.
-- Early Corn yield reports in Illinois are varying quite a bit with many
producers saying yields are below a year ago. Many of these reports are
coming from areas south of Springfield IL. where rains were less than areas
north.  Did hear some reports Monday of yields less than a year ago in the
northern areas but this area is not seeing a great deal of harvest yet.
-- China's Ag Minister told the official Xinhua news agency that early frost
had hit a wide area of inner Mongolia and warned of possible damage to Corn
in the north.
-- Funds all on the sell side Monday selling  3,600 Corn,  2,800 Soybeans,
1,500 Wheat,  500 Meal  and  3,300 Oil.
-- Corn spreads: ABN 1,200 CZ/CZ7, Tenco 500 CZ/CH, JPM 500 CZ/CN, FCS 500
CZ/CN.
-- 6-10 day forecast shows normal to below temps, normal to above precip.
-- Outside markets:  metals higher, energies lower, dollar weaker against
all currencies.


Cash Markets
-- CIF Corn  steady.    Sept. +55 to +58, LH  Sept. +56 to +58, Oct. +59 to
+63, Nov. +60 to +65, Dec. +60 to +65, Jan. +50 to +55, March +51 to ??.
NS Corn Sept. -15, FH Oct. -22, LH Oct. -16, Jan/July +3; Evansville  CSX
-1Z


TREND:

The market was extremely soft today---a surprise given the crop report in
AM. Much of the selling tied to weakness in other markets---crude oil off
$1.00 and gold off $25 as the grains opened.

Suspect the wheat and corn markets still laboring with length. The long term
corn story is so compellingly bullish that some traders just decide to set
out the break---especially true of the index funds were scale down buying
seems to be the mode in place.

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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