Linn Group Morning Corn Comment

CHICAGO - Oct 10/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  WOW.  We haven't seen days like this at the CBOT in probably
10 years.  Wheat is leading the grain complex higher on a much lower
Australian crop and the Ukraine limiting exports through at least the end of
the year.  Corn futures at the CBOT moved over 7 percent higher to a new 2
year high and as we saw the front month go limit up at one point, only to
settle 18 ½ higher.  The corn market is definitely following the wheat
market higher as we saw wheat locked limit up and the synthetics showing
wheat another 25-35 cents higher.  Traders point to not only the huge demand
for corn from exporters, ethanol, and feed, but we are also starting to see
managed money come back in the grains propelling the corn market higher.
Like a broken record, traders like to say that rallies are limited by
harvest, but that doesn't seem to have stopped corn from going higher 25
cents higher since the 1st of October.  Funds were huge buyers, probably
close to 20,000 contracts.  The market saw huge volume yesterday with lower
open interest which can't be explained especially with the funds buying
20,000 contracts.  Colder, wetter weather that is forecast for the coming
week will delay harvest, but it does not appear to be the beginning a
specific pattern.  Exports were slow over the weekend, but we did have a
holiday in Japan and the US.

eCBOT market was very active overnight as we saw over 35,000 contracts
traded.  We had an 8 cent range overnight, but the market closed ½ lower,
even with the wheat market closing limit up again in the night session.
This counter seasonal move in the corn has caught many traders off guard and
that has probably contributed to the move higher as well as the huge surge
in wheat prices.  We have seen some very good farmer movement of corn as the
prices have increased into harvest.  This is very unusual and has caused
many a trader to try and fade the rallies, but he has been unsuccessful so
far.  There is a lot of talk of the wheat being lead higher in the December
by liquidation of the bear spreads instead of the fundamental information.
Don't get me wrong, there is a lot of fundamental information for wheat to
go higher, but maybe this move is being pushed up even higher by the spread
liquidation.  This spread liquidation is what is dragging corn higher.
Demand is still very strong for corn, but it will be interesting to see if
that disappears at these lofty levels.  I look for corn open lower today and
then it will be up to the funds to decide where we go from there.  Front
month wheat will open 20-30 higher and we will see from there.  Prices are
getting high enough that we should see selling come into the market, but the
funds will be the wild card.

Thursday, release of October Supply Demand and Soybean/Corn production
report

eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCZ6                 289^0    -0^4                  293^0    285^0
ZCH7                298^0    -4^4                  302^4    296^0
ZCK7                308^0    -0^6                  308^0    303^2
ZCN7                309^2    -4^6                  312^6    298^0

Early Opening Calls: 2-3 lower

Top News

-- Funds aggressive on the buy side Monday buying 17,000 Corn.
-- Asian corn traders are expected to slow their purchases of corn until
prices settle down, according to various traders in that region.
-- Buenos Aires grain exchange weekly report suggests corn seeding progress
was good.  Acreage seeded was seen at 17.1%, up 5.0% from the previous week.

-- Corn spreads: O'Connor 1,000 CK/CH, JPM 600 CH/CZ, UBS 1,000 CN7/CN, 500
CZ7/CZ.
-- Chinese grain forecaster expects grain production to grow to 490 mln T in
'06 from 484 mln T seen in previous year. Corn production in 2006 is
expected at 141.0 mln T up from the 139.4 mln T seen in 2005. However, they
expect smaller wheat acreage to lower output in '07 season to 100.5 mln T a
reduction of 2.4% from this year's wheat crop.
-- Volume was 295.9 with open interest down 3.0 to 1278.5
-- 6-10 day forecast shows below normal temps, normal to above precip
-- Outside markets:  metals down significantly, energies down, dollar higher
against all currencies.

Cash Markets
-- CIF Corn steady off  1  . Oct. +54 to +57, LH Oct. +57 to +60,  Nov. +59
to +62, Dec. +63 to +66, Jan. +53 to +58, March
 +53 to +58.


TREND:

Too extreme to be able to comment on what comes of this---wheat already up
against the next level that should create a problem but when you trade 65 to
70 cents higher in one day, how can you say it is done??? Blow off? Probably
but we will not be done until all the spreaders have gotten even. Rolled all
long WZ hedges forward to the Mch today. For those that did not lock in the
carries---told them to take a cold shower and look for carries to come back.
This is a money game that has taken the Z/H wheat to 10 cent inverse. Should
again trade at wide carries as we see deliveries on the WZ. There is still
no indication the cash has firmed enough to load any out---and basis levels
weakened today on the extreme rally.

Corn also up against the next major resistance level of 2.90. Should
certainly see a set back here. The cash had big farmer selling all over the
belt over the weekend. Some of the feed trade says the move in wheat to
record levels over corn has scared them into covering---assuming that wheat
has a fundamental reason for the rally and from this point will pull corn
along. Too bad they didn't listen to that story two weeks ago.

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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