Linn Group Morning Corn Comment

CHICAGO - Nov 2/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  The corn market pushed into new highs yesterday as the demand
for corn seems to get bigger and bigger everyday.  Demand from exports,
livestock and ethanol continue to keep pressure on the corn market and when
you add new money from the fund sector, the price of corn keeps going
higher.  Funds were buyers of app. 5,000 contracts, and there was big
sellers earlier in the day, with ADM selling 6,000 contracts.  Some talk of
investment funds increasing their allocations into corn at the beginning of
the month and/or moving money out of the energy markets into the grain
complex.  So Korea is supposedly trying to buy corn from China because of
the high price of corn in the US, but China is expected to not allow exports
anymore after having heavy sales already, so many expect So Korea to be
looking back to the US for their corn needs.  Rumors also circulating that
FC Stone and Informa will release production numbers below the USDA
estimate.  The corn market found very few resting sell orders above the
market maybe causing some of the big move higher in corn.  Who is going to
sell corn?  The farmer?  He thinks corn is going to $5.  Open interest was
up almost another 10,000 contracts.

eCBOT Dec corn opened at the 2 year high of $3.35 and kept going for higher
from there to close another 5 cents higher.  After the close, FC Stone
released their production estimate of 10.808, with a yield of 152.1 bu per
acre.  This number was widely speculated to be a lower number yesterday
during the session and that speculation was confirmed.  Informa released
their estimate this morning that was 10.729, with a yield of 151 bu per
acre.  Both numbers compare with the USDA Oct estimate of 10.905 and 153.5
bu per acre.  Both the FC Stone and Informa numbers will be considered
bullish by the marketplace, but some of that was built in yesterday.  Weekly
export sales were very strong again this week at 1.027 mil, in the middle of
the estimate of 900,000 - 1,100,000.  The question today is not if corn is
going to go higher, but how much higher is it going and will there be a
break to buy it.  Technicians this morning want to point to corn going to
$4.25 if we get a weekly close above $3.35.  It will be very interesting
today to see if we extend from the move overnight or if we find selling at
these elevated levels.  The funds were only net buyers of 5,000 contracts
yesterday, so they have more to buy today and if we don't have very many
sell orders above the market, corn could really extend higher.  I would
recommend getting long corn, but the question is how to get long into
strength without paying too much.  Look at bull spreads and buying calls,
selling puts.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ6                 338^4    5^0                   340^0    335^2

ZCH7                352^2    5^2                   353^0    348^0

ZCK7                358^6    4^6                   359^4    353^0

ZCN7                364^4    4^4                   365^0    359^4

Early Opening Calls: higher 4 to 6c

Top News

**USDA Export Sales**

-- USDA Corn 06/07 Export Sales Net: 1.027 mln mt; expected 900k - 1.1 mln

**Private Forecaster Estimates**

--US Nov Informa Corn Production Estimate:  10.729 bil bu. - sources report

--US Nov Informa Corn Yield Estimate:  151.0 bpa - sources report

--Nov Corn crop estimated at 10.808 bln bu - FC Stone report

--Nov Corn crop average yield at 152.1 bu/ac - FC Stone report

-- Export News: USDA reports private sale of 132,000 mt of Corn to 'unknown'
for 06/07

-- Officials at Chinese exporter COFCO say the government has asked them to
slow down Corn export sales as it is worried about domestic prices. The
official said that current export permits are valid until the end of
February and the government has not approved any plans for exports after
that.

-- Chinese think tank director says China hopes by 2010 to use 11.0 mln T
biodiesel & 6.7 mln T of ethanol to meet its growing fuel demand. The
combined renewable fuels demand of 17.7 mln T would meet 10% of expected
demand.

-- Funds shifted back to the buy side Wednesday buying 5,000 Corn

-- Open interest in Corn up 9,292 Wednesday

-- Corn spreads: Fimat 1,000 CH/CZ, RJ 500 CZ/CH, IA 600 CZ/CN, Tenco 500
CZ7/CZ

-- Volume was 259.6, with open interest up 9.3, 1384.3

-- 6-10 day forecast shows above normal temps and precip

-- Outside markets:  metals are higher, energies are lower, dollar is mixed
vs. other currencies

Cash Markets

-- CIF Corn  up 1 to 2 .  Nov. +62 to +63, Dec. +63 to +65, LH Dec. +64 to
+68, Jan. +54 to +60, Feb. +54 to +59, March +54 to +59, Apr. +49 to +51.

TREND:

Trade tomorrow will be very important for corn and beans. The closes into
new highs with outside days up will be important if confirmed. Typically
will not be, but forced me to cover the bean hedges put out last week for 50
pct of the bean crop. Will have to work to make up the 20 cent losses. If
this close in beans is confirmed it could lead to another 50 to 75 cent
rally in beans.

The trade recommendations today included continued selling of vol in Chi
wheat---especially if against long corn or KC wheat. If Chi wheat comes back
into a bull trend taking out the recent highs, will be on a rally in KC or
Mpls



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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