Linn Group Morning Corn Comment

CHICAGO - Jan 5/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was lower again Thursday after rallying in the middle of the
session.  Traders continue to point to some fund liquidation and the overall
sell off of all commodities.  Crude was much lower again which traders said
put pressure on the corn and soybean oil futures as those markets are now
considered the new energy play.  Volume was pretty strong with the funds
selling close to 6,000 contracts by the end of the day with some buying in
the March contract at the end of the day bringing that contract off its
highs.  Traders continue to point to the investment funds as being the
catalyst to this market because of the sheer size of their positions and the
money they have to invest.  Remember, starting this week, Commitment of
Traders report will have a special section on index funds and off-exchange
activity.  Many traders hope this will give a clearer idea of fund
positions.  So. American weather has been excellent and the recent moisture
in the US Midwest has added much needed moisture to many areas that were dry
into the fall.  Technicians said the recent break through the 50 day moving
average is a bearish sign and could provide more ammunition for liquidating
long positions.

eCBOT market was higher overnight on light buying after the sell off the
last 2 days.  Volume overnight was pretty good with the March contract
closed 1 higher.  Negative news out this morning was export sales at 573,000
well below the 700,000 to 1 mil estimate, but traders blame a lot of that on
the holiday this week.  On top of this number was the sales announced
Wednesday and Thursday that will push next weeks back up to the recent lofty
levels.  Another bearish factor this morning is the continued sell off by
the outside markets, especially the metals and energies.  We should find
support in the crude oil markets as we have seen a big sell off the last
couple of days, but this market has been the leader as of late.  Many
traders expect to have a bounce this morning after the recent sell off and
many traders are encouraging their users to be scale down buyers on any sell
off.  Fund activity will once again be the focus as they control so much of
the investment dollars and many of these funds seem to have deep pockets and
long term time horizons.  Corn is still a demand market and that demand is
not going anywhere anytime soon.  Talk again in the papers this morning
about the government under estimating the demand for corn for ethanol and
the increase in food prices this is going to create.  There are only so many
corn acres to be added without repercussions.  Look for the corn market to
be lower this morning, with the funds dictating where the market will go the
rest of the day.

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 249.9 with open interest down 4.9 to 1406.3

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

-- Outside markets:  metals and energies lower, dollar higher against most
major 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 all assumed the selling in grains this week was tied to long liquidation.
The open interest did not support this with increases rather than
reductions. It may have been instrumental in the trade today. Early weakness
found very active commercial pricing in all pits---wheat, corn and beans.
These buyers are set in stone at lower levels but will not chase the market
higher. Thus we stalled on the early gains and failed when the market.

The trade in wheat into new lows is no surprise. It is still my contention
that soft red wheat has to go to feed grain levels and help alleviate the
tightness in corn. Chi is back down toward the bottom of the very broad down
trending channel and close to support near 4.50. Not a place to be pressing.
Cover new crop SRW hedges on a test of 4.65 and move to the sidelines one
more time. KC support should surface 10 cents lower as we get close to 4.65
in Mch. Take off KC new crop hedges on a test of 4.75 for a moment. I am
basically saying we will stop short of turning the grain markets into a
bearish trend.

Corn is the same way---bend but not break. The close today in CH took out
the Dec lows at 3.62 and closed well below the 50 day moving average. It
could be enough to force a test of the 3.50 gap. There will be user pricing
all the way down.



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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