Linn Group Morning Corn Comment

CHICAGO - Oct 11/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Well, we got our break in corn futures after the Dec wheat
couldn't hold its limit up move on the opening.  We knew the break in corn
and beans would come after those markets followed wheat higher the last
couple of days, especially on Monday, but we just didn't know when it was
coming.  We saw corn set back almost 5% for a double digit loss with
December closing 14 cents lower.  Volume was very strong again reaching
almost 300,000 contracts but the funds were relatively quiet, selling 6,000
contracts.  Traders also said we saw huge farmer selling after futures
rallied to almost $2.90 on Monday contributing to the sell off.  Harvest
pressure will increase everyday as farmers get farther and farther along,
but cool, wet weather will put a damper on harvest for the next week or so.
Wheat is still leading the grain complex and even though we saw big selling
in the beans, corn and deferred wheat, we still saw the December wheat close
higher on the day.  We have the crop report being released tomorrow with the
average analysts expectation of the 2006 US corn crop at 11.137 bil bu, up
from the September forecast of 11.114 billion.  Traders have started trying
to square positions into the report, with some of the profit taking
yesterday suggesting that has already started.

eCBOT was pretty active overnight at 12,000 contracts, but nowhere near the
35,000 contracts we saw on Monday night.  Not much has changed in the news
as we have seen the corn market sell off after the big run up from the
explosive wheat market.  The crop progress report last night showed corn 29%
harvested, vs. 35% average and 32% last year.  This will be looked at as a
little positive for corn futures as many traders expected the number to be
close to 40%.  On the other side, one veteran trader said this morning that
the trade will look at the 29% harvest will a grain of salt because we had
such an excellent harvest weekend and that isn't included in the 29% number.
Time will tell next Monday night.  The corn market is still being lead by
the wheat market and we could have another explosive day in wheat as the
market digests the news released by the Australian Wheat Board that the
Austrian wheat crop is estimated at 11.5, vs. 25.0 last year, and that
Australia is limiting exports from its East Coast.  What this all means for
the markets, especially before a USDA crop production number is anybody's
guess.  Look for the corn market to move in a sideways trade today with the
anticipation of the USDA report tomorrow morning.  The wild cards will be
the wheat market if it takes off either up or down, or if we have increased
fund activity.


eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCZ6                 277^0    1^4                   279^4    275^2
ZCH7                289^0    1^0                   291^2    287^4
ZCK7                296^4    2^2                   297^2    294^0
ZCN7                301^0    1^4                   303^0    299^2

Early Opening Calls: 1-2 higher

Top News
-- The weekly USDA progress report shows Corn harvest 29% complete vs. 35%
last year and 32% average.  Soybean  harvest  47% complete vs. 56% last year
and 47% average.  Winter wheat planting 69% complete vs. 68% last year and
70% average. Winter Wheat emerged 37% vs. 38% last year and 41% average.
-- The CBOT raised Corn margins to $650 for hedgers vs. $500, Wheat $1250
vs. $1000-- Funds Tuesday sold 6,000 Corn.
-- Corn spreads: JPM 800 CZ/CZ7, RJ 500 CN/CZ, 200 CZ/CHJPM 400 CH/CZ, 300
CZ/CN.
-- 6-10 day forecast shows below normal temps, normal to below precip
-- Volume was 295.5, with open interest up .125 to 1278.5
-- Outside markets:  metals slightly higher, energies slightly higher,
dollar mixed against other currencies


Cash Markets
-- CIF Corn up 1 to 2  . Oct. +59 to +61, LH Oct. +59 to +63, Nov. +61 to
+65, Dec. +65 to +67, Jan. +54 to +58, March


TREND:

The widening of wheat spreads may have been tied to a notice by D-Bank that
they would start the roll from spot to the new crop early. Spreads widened
and got the pressure from signs that soft wheat basis had turned sour. There
were some situations where it became more palatable to sell cash wheat than
make another margin call on short hedges?

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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