Linn Group Morning Corn Comment

CHICAGO - Oct 3/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  The corn market finished higher on Monday as we saw the spot
price in corn reach 2 year highs following wheat that reached almost 10 year
highs earlier in the session.  The day started higher as we saw wheat open
15 cents higher and corn follow as traders are beginning to be worried about
global stocks of wheat.  These problems have analysts predicting the global
stocks of feed grains to be reduced to near 30 year lows, a very bullish
indicator for corn.  This is on top of already excellent export numbers and
ethanol demand.  The big initial push in corn prices brought out fresh
technical buying, but hanging over the market is still the huge crop that is
just starting to get harvested.  We should have a much better idea of yields
by next Monday.  Funds were pretty quiet, buying 2,000 contracts on lower
volume compared to the last couple of days.  Corn didn't get back to its
highs from early in the session, but it held up pretty good compared to
wheat which even though it closed higher on the day, it was no where near
the highs from the opening.

eCBOT market was lower overnight on light volume of only 5,150 contracts.
Technicians couldn't talk enough about the corn market being over bot and
due for a pullback after the last couple of days and we probably saw a
little liquidation starting last night.  Corn is following wheat right now
as the market will be tough to rally into a harvest predicted to be the 2nd
or 3rd largest on record.  This rally in corn is truly contra-seasonal and
could provide for some danger to the longs at these levels and the net fund
long position keeps getting bigger and bigger.  The USDA released their
weekly crop progress report that showed only 20% harvested vs. 25% last year
and 23% average.  This number shouldn't be news today, but it needs to
improve in coming weeks.  Corn at these levels can be dangerous this time of
the year.  Wheat is the leader and if we see a significant pull back in
wheat, corn will follow.  We could easily see a 10-20 cent pull back in
corn, especially this time of the year.  As one veteran trader said this
morning, I don't think it is a question of corn setting back, it is a
question of how much and at what levels do I want to get long corn again.
Take a look at buying puts in both Nov and Dec as a way to play the pull
back in corn and to limit risk.  The funds are still the magic player in the
market and buying puts will limit your risk if they decide to buy more corn.
Traders also point to the outside markets, metals and energies, as being
sharply lower and another reason we could see a pull back today.


 eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCZ6                 265^4    -2^2      267^2    265^2
ZCH7                279^0    -1^6      280^2    278^2
ZCK7                286^0    -3^0      288^0    286^0
ZCN7                293^6    -2^4      295^6    293^6



Early Opening Calls: 2-3 lower

Top News
-- The USDA progress report shows Corn harvest 20% complete vs. 25% last
year and 23% average. Corn and Soybean harvest behind last year and average
but not a big market factor yet.
-- The Argentine Ag Secretariat says recent rains have helped the Wheat crop
in eastern crop areas but hot and dry conditions continue in the northern
and central crop areas.  Corn planting now stands at 12% complete vs. 22%
last year.
-- Funds not that active Monday.  Funds Bought 2,000 Corn.
-- Corn spreads: Tenco 200 CZ/CH, FCS 300 CZ/CH, Caly300 CH/CZ, Man 200
CN/CH.
-- 6-10 day forecast shows normal to below temps West, above East, normal to
above precip
-- Volume was 171.1, with open interest down 2.4 to 1292.0
-- Outside markets:  energies and metals down sharply, dollar mixed against
major currencies.


Cash Markets
-- CIF Corn  steady off  1.  Oct. +58 to +60, LH Oct. +61 to +64,  Nov. +63
to +65, Dec. +64 to +67, Jan. +52 to +55, March +53 to ??.


TREND:

CBOT raised margins about $100 on inter-year spreads for wheat and corn. The
margins were also raised on wheat by about $150 to $1080 a contract, but
this comes on the back of very hefty liquidation of the spreads.

Corn market continues to amaze with the ability to rally into the heart of
harvest. Delays in the east are contributing. Hard farmer holding also
supportive. Some talk of reduced yields ---from what was expected. Some are
starting to doubt the "normal" or guaranteed increase in the USDA corn
yields for the Oct report---also supportive.

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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