Linn Group Morning Corn Comment

CHICAGO - Oct 16/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Well, we saw the corn market extend its rally on very strong
trade from the funds after we received better export sales on Friday morning
and we saw investment funds come into the market again.  As we see smaller
stocks and increased exports, we will continue to see the funds come into
corn and buy this market.  We had Goldman Sachs release a report saying they
see corn going to $3.68 and when we start seeing reports like that in the
press from a well known firm, the money is going to stay and come into that
market.  Trading was once again very active with the volume close to 300,000
contracts and the funds buying 10,000 contracts.  Exports sales were above
the range of the estimate, but as one trader said, we need to continue to
see the sales above estimates or at least very strong every week.  Action on
the floor was very active and we continue to see the corn market make new
highs and technicians point to the blow out through the $2.90 level.

eCBOT market closed a little lower with a 4 cent range, but closing up near
the high.  Private exporters reported this morning 105,000 tones sold to
Japan with delivery this marketing year.  This will be seen as bullish and
might bring corn up higher on the opening.  Traders will continue to look at
the corn market with some skepticism because we are seeing this huge rally
in the face of a strong harvest.  The funds are very much in control of the
corn market as we have seen the last couple of days and because of this, the
corn market is very volatile and very dangerous.  We will see the corn
market have a blow off top and come back to earth with the big harvest
numbers we are starting to see.  The market will be very interested in the
crop progress numbers released this afternoon as it will show some good
numbers since we had an excellent week for harvest.  Should be an
interesting opening as the market wants to call corn lower, but with wheat
5-7 higher, it will be tough to keep corn lower.  The implied volatility is
at record highs, over 20% higher for this time of the year, so we may see
some acceleration higher from here before we see the market blow off.  I
would expect the corn market to trade sideways and look for direction from
the wheat market unless the funds are back buying the market.

eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCZ6                 313^6    -0^6                  314^0    309^2
ZCH7                322^6    -1^2                  323^4    319^2
ZCK7                326^4    -3^0                  328^6    323^2
ZCN7                331^0    -2^0                  332^4    328^0

Early Opening Calls: steady to 2c lower

Top News
-- USDA reports private sale of Corn to Japan for 06/07 totaling 105,664 mt
-- Chinese Soybean, Meal, Oil and Corn closed higher.
-- Funds continued their buying way s Friday buying 9,000 Corn.
-- The preliminary report shows Corn open interest up 13,320 Friday.
-- Volume was 291.7 with open interest up 13.3 to 1292.8
-- 6-10 day forecast shows below normal temps and normal to below precip
-- Outside markets:  metals stronger, energies mixed, dollar lower against
most currencies.

Cash Markets
-- CIF Corn off 1. Oct. +60 to +62, LH Oct. +60 to +62, Nov. +61 to +62,
Dec. +64 to +66, Jan. +56 to +60, March +56 to +60.



TREND:

For the corn market, the key trade technically was accomplished last Friday
with the second close on the weekly chart above the breakout highs at 2.62.
Just like wheat when it broke out at $4.25 on a weekly - monthly close,
tremendous market velocity and upward price movement followed - faster than
even the bull could envision. Corn was set to stall at $2.90 we suggested
and it did for 3 days, but it would not break and a bull reaction after a
government report ensued propelling prices up another 25 cents in two days.
That type of velocity sets the stage for completion of a major objective, to
test weekly highs at 3.25-30. We should do that early next week and then see
what type of reaction we get.  Expect too much buying on a re-tracement to
2.95 to 3.05 so a move to the long side in that range is warranted. Final
price objectives for the current corn move would be around $3.45 which means
we could have new highs again in October that would erase the resistance on
the weekly chart. All of this is a bull scenario, but we will eventually get
that swift - high volume break that will shake the foundations of this
market when everyone is long.  Scale into bull futures positions on the
break days, buy puts and hang on.  Buy out of the money calls on the shake
days and write a downside put to pay on a small break. Plan on an extended
bull market that ultimately has major bull spread moves in the March-Dec7
and strong volatilities.

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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