Linn Group Morning Corn Comment

CHICAGO - Nov 8/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  The corn market moved significantly higher on the back of the
lack of sell orders and the anticipation of the USDA releasing a bullish
report tomorrow morning.  The front month almost got up to 10 year highs as
traders are continuing to worry about the reduction in the size of the US
crop and a major reduction in carry out.  I couldn’t have been more wrong
yesterday when we thought the market would start lower and flat price would
just stumble around until the USDA report was released.  The corn was lower
early and then found some strength initially on corn/wheat spreading, then
it found some buy stops with very few sell orders above the market.  Traders
said there was end-user buying in the corn today along with continued good
demand from exports, ethanol, and livestock.  Ethanol manufactures were
especially active in the options, buying put spreads, selling calls and
buying futures.  Volume was pretty heavy with the Goldman roll staring and
traders estimating 35,000-40,000 contract rolled out of Dec.  Harvesting is
becoming less and less of a factor as most of the corn area is almost done
with harvest.  Goldman Sachs announced the composition of their index will
not change in 2007, but the size of investment in the Index will climb from
70 bil to 110 bil, an increase of over 50%.  Funds bot app. 6,000 contracts
on Tuesday as many traders said users are still in need to buy corn and
nobody is going to sell the corn market into the USDA report.

eCBOT market opened unchanged yesterday and then rallied the rest of the
session with the Dec closing 4 ½ higher.  Volume was pretty heavy at 26,000
contracts, but a lot of that was spreading Dec to March.  Nothing new out on
the news wires this morning so all the talk today will be on the release of
the USDA number tomorrow morning.  Talk on the trading floor was the USDA
was going to release a sub 150 yield number on a big decrease in the
Illinois yield.  Many traders said this was the cause for the rally plus
nobody wanting to step in front of the corn market by selling into the
number.  Is this another case of buy the rumor, sell the fact?  Traders are
saying this morning that it will have to take a very bullish report to keep
the corn market going higher after what we have already built into the corn
prices the last couple of days and it should continue higher today.  A
neutral to bearish report tomorrow morning will hit the corn hard with some
talking of a 15-20 cent down move.  Buy puts on a higher corn market today
to play a neutral number tomorrow?  Remember, we have record long funds in
corn at over 300,000 including options.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ6                 355^4    4^4                   356^6    350^6

ZCH7                370^6    4^0                   372^0    366^0

ZCK7                377^0    4^2                   379^0    372^4

ZCN7                383^0    4^0                   384^6    378^0

Early Opening Calls: 3-5 higher

Top News

-- A study released by the Center for Agricultural and Rural Development at
Iowa State University estimates breakeven for Ethanol in Corn prices at
$4.05. They used the current prices for Crude Oil, Natural Gas, and DDG’s

-- Goldman Sachs released a press release said the Gold Man Sachs Index
commodity composition will not change in 2007. They also said investment in
commodity indexes will increase to $110 bil. as of January from $70 bil.
previously.

-- South Africa corn consumers predict a sharp increase in South African
corn from previous estimates.  The presumption is based on better than
expected total corn acreage, plus more favorable weather.  Corn millers
believe the corn acreage to be about 7 million acres, 6% higher than
previously estimated by government agencies.

-- Indian government announced plans to increase the total ethanol additive
in gasoline to 10%.  This is up from a previous requirement of 5%.  The
government believes this will require approximately 296 million gallons of
ethanol.  The move is intended to reduce pollution in the developing
country.

-- Funds were buyers in Corn buying 6,000 contracts.

-- Chinese Soybean, Meal, Oil and Corn futures closed higher.-- Corn
spreads: Fortis 14,000 CH/CZ, MLP 6,000 CZ7/CZ, ADM 2,000 CZ/CH, FCS 2,000
CZ/CH  JPM 1,500 CZ/CH, 1,800 CZ/CZ7, IA 1,000 CZ/CH, Tenco 1,000 CZ/CH, RJ
1,000 CZ/CH.

-- 6-10 day forecast shows normal to below temps, normal to above precip

-- Volume was 349.2 with open interest up .465 to 1408.1

-- Outside markets:  metals lower, energies higher, dollar mixed.

Cash Markets

-- CIF Corn steady off  1  .  Nov. +61 to +62,  Dec. +64 to +66, Jan. +54 to
+56, Feb. +54 to +57, March +53 to +58, Apr. +48 to +51. May +48 to +50

TREND:

Keep looking for a correction with the report right in front of us---not
much showing yet. Trade looking for a 1 bushel reduction in corn yields with
a gain of 1 or more in bean yields. Current action makes it pretty difficult
to get a bullish surprise?

Rapeseed continues to gain on beans and should maintain the gains as the
favored oilseed due to oil yields and quality.

Look for a quieter day tomorrow but said that this AM as well.



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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