Linn Group Morning Corn Comment

CHICAGO - Oct 17/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Corn finally came up for air today and had a mixed day as we
saw the wheat market buoy nearby prices at the end of the day, but we did
see some pressure in the deferreds on profit taking from the rally Thursday
and Friday.  We continue to see harvest pressure but traders are very
concerned about pushing corn to much because of the dynamic of the wheat
market really taking off higher.  As I have been saying, corn usually has
pressure this time of the year, but this isn't a typical year.  The cold,
wet weather that looks to stay over the Midwest the next 7-10 days should
keep harvest in check for both corn and beans.  Some traders said it looks
like the corn is trying to consolidate for another rally higher, especially
with traders afraid to aggressively sell this market.  After the market
close, crop progress showed 41% corn harvested, at the bottom end of
estimates.

eCBOT market was pretty active overnight as we saw Dec corn close 6 cents
higher on app. 10,000 contracts.  Once again corn surprised traders rallying
in the overnight market on new really new news.  Harvest data released after
the close was at the low end of the estimates and the forecast for cold, wet
weather the next week to 10 days is probably the reason for the rally, but
don't discount the power of wheat.  It was higher overnight after the strong
close in the regular session yesterday.  As we have been discussing, traders
are very nervous about selling the corn market and that will only get worse
as it continues to go higher.  Option volatility is sky high, telling you
not to sell this market.  Traders will be looking for export data on
Thursday morning to support the export numbers everybody has come to expect.



eCBOT Overnight
Contract            Last      Net Change       High      Low
ZCZ6                 323^0    6^2                   323^6    315^6
ZCH7                332^2    5^6                   333^0    325^4
ZCK7                337^2    4^6                   337^6    330^6
ZCN7                339^4    5^2                   340^6    333^2

Early Opening Calls: higher

Top News
-- Chicago Mercantile Exchange confirms buyout deal for rival CBOT exchange.
The combined value of the 2 exchanges is at $25 billion based on recent
closing prices.
-- Exports:
*South Korea bought 110,000 mt. opt. org. Corn for Feb.
*Taiwan tendering for 35,000 mt. US Corn for Nov.
-- The USDA progress report shows Corn harvest 41% complete vs. 48% last
year and 43% average.  Soybean harvest 69% complete vs. 74% last year and
65% average. Winter Wheat is 79% planted vs. 78% last year and 80% average.
-- Corn spreads: Tenco 800 CZ/CN, IA 500 CH/CZ7, 500 CN/CZ7, ABN 300 CZ/CH.


Cash Markets:  CIF Corn off 1. Oct. +59 to +61, Nov. +60 to +62, Dec. +64 to
+66, Jan. +56 to +60, March +56 to +60.



TREND:

Wheat and corn are extremely overbought. It could have a deep correction at
anytime. However, Chicago wheat today showed its colors with another round
of fund type buying late in the session. Altitude is a little rare, and
attitudes are showing the stress. Look for ten cent moves to be the norm, up
or down, with pockets of no bids or offers. Corn also is a little overdone
and due a break. The magic level of $3.00 will most like provide pretty good
support. There are a lot short bought users that will love a chance to own
corn under $3.00. Still look for the Dec corn to test the $3.25 area. It
seems to be a magnet area for now.

While this March/Dec spread has already moved a long ways, it is part of the
rationing process. Do not look for the inverses to go away. They will
probably get bigger. Look back at the wheat spreads.
As goes wheat, there goes corn and beans will follow. This market is still
short. Look for a day of reckoning shortly. Meal is cheap relative to corn.
If corn rallies, meal will get tugged along. But feed rations are already
maxed out, so this is a tempest in a tea pot. No lasting rally here. Crude
and heating oil are testing last week's highs with a very strong close
today. Take those highs out, and energy alternatives, including bio-diesel,
will get a boost to an old story.

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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