Linn Group Morning Corn Comment

CHICAGO - Dec 5/06 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn Update:  Our sell off continued in the corn market as we saw the Mar
contract close almost 3% lower.  Traders point to not only profit taking and
stop orders below the market, but also lower crude oil markets, a firmer
dollar, and the greater prospect of increased acres of corn plantings.  With
more and more corn being used for ethanol, corn will act like an energy
contract and it will fluctuate with the crude oil market.  We had the same
situation last spring/summer when there wasn’t any fresh news.  There is
still talk of the USDA releasing some CRP acres to plant corn, eliminating
the penalty for taking the land out of production.  As one trader said, this
just makes sense to gain corn acres for next year.  The USDA declined to
comment on the situation.  Supporting the corn market is demand and exports.
Cash traders from So. Korea said they would probably be in to buy US corn
this week with the lower prices, especially with rumors that China is going
to default on their low priced exports for Nov and Dec.  China is having a
difficult time originating corn with the higher prices.  The corn market
will be very volatile with these high prices and that is part of what we are
seeing the last couple of days.  Commitment of Traders on Friday showed near
record longs in corn, but not quiet as much as many were speculating.

eCBOT market was lower again overnight as we saw some follow through after
yesterday’s action with the Mar closing 3 lower.  Talk of the floor was
investment funds moving out of the corn and wheat and back into the crude
oil.  Not unusual to see investment funds take profits this time of the year
and most funds that have been long the corn are taking good profits.  The
fundamentals of the corn market haven’t changed, it is still a demand
market, but we are starting to see some profit taking and we are seeing
traders unwilling to pay up for the corn at these higher futures prices.
The world has become a marketplace that wants to wait to get their needs
until they need it, instead of buying ahead of needs and storing it.  This
is fine until there is a shortage and you have to go get corn today which is
what we have seen lately.  China defaulting on exports should help support
the market today with those importers having to go to the US to buy corn if
they can’t wait till spring.  Exports overnight were uneventful, but traders
will be keeping their eye on the weekly sales number released on Thursday
morning.  Investment funds bot the corn market and pushed it to 10 year
highs and if they want, investment funds will sell the market and take it
lower.  Technically, corn is approaching a very important area 2-3 lower so
keep an eye on the 372 level vs. the Mar.

Corn Update

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ6                 361^4    -1^2                  361^4    358^0

ZCH7                372^2    -3^2                  375^0    370^4

ZCK7                378^0    -3^0                  380^4    376^4

ZCN7                382^4    -2^2                  384^4    380^4

Early Opening Calls: Lower 2 to 3 cents

Top News

-- Export News: Israel tendering for 48,000 mt. opt. org. Corn for Jan/Feb.

-- Export News: Bangladesh cancelled a tender for 65,000 mt. of Wheat

-- Deliveries: Corn 1,158 thru 11/14/06 no stopper.

-- Funds a little more aggressive selling Corn Monday selling 9,000
contracts.

-- The Argentine Grain exchange estimates Corn planting at 84.4% complete
vs. 90.5 % last year. The exchange also said Corn plantings will increase
another 50,000 hectares over initial forecast due to higher prices.  Soybean
planting was estimated at 64% complete vs. 66% last year.

-- Corn Spreads: O'Connor 1,200 CZ7/CHABN 1,500 CN/CZ7, ADM 500 CN/CZ7

-- Volume was 212.3, with open interest down 9.5 to 1377.7

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

-- Outside Markets:  Metals and energies higher, dollar mixed against
currencies

Cash Markets

-- CIF Corn steady. Dec. +44 to +47, LH Dec. +47 to +51, Jan. +50 to +53,
Feb. +52 to +55, March +50 to +53, Apr. +46 to +49. May +46 to +49

TREND:

We also have the corn market gapping lower with a test of the $3.60 to $3.65
area possible but that should be about it for this downswing. After our run
over $3.90 last week, a 20-30 cent break (today’s lows already puts us 20 ¾
off the highs) is a corrective trade at this point. Again, the volatility
will continue as we get close to a $4.00 corn market, so look to the options
to be involved. Wheat was fairly calm as it held its support at $5.10 in
Chicago. This has set up March for another run at the $5.30 level. A bit of
a range trade but the downside would appear limited for the moment. Expect
buying in the $5.15 to $5.10 area. Interesting trade on the July after
making new contract highs last week we’re trying to hold this $4.90 to $5.00
area. A close over $5.08 would run us to $5.30 there.  Look for a further
recovery in the wheat –corn spread with a test of the $1.50 level on March
just ahead. Expect some problems there. Meanwhile, KC has gapped lower as we
try to test the lower range of support again from $5.25 to $5.30. Same
program, buy the breaks in this range trade. However, the kwh-wh is rolling
back under 20-cents - look for support in the 10-15 range. Chicago would
still appear to be the s/t leader.



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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