Linn Group Morning Corn Comment

CHICAGO - Jan 8/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market closed higher on Friday on late day fund buying as many
traders felt it was funds evening out positions going into the weekend.
March closed 6 cents higher on buying of 2,000 contracts with much of that
coming the last 30-45 minutes.  There was a big fund involved in the options
on Friday, but nobody knows if the trades were covering positions or if
these were new positions.  Traders also said they were looking for corn to
bounce after falling almost 30 cents last week, on the heals of the huge
sell off in the crude oil market.  The market also gained support as the new
Congress took office and there seems to be a big influx of energy bills
aimed at bio-fuels.  Along these lines, the grain markets are going to start
acting a lot like the energy markets, so when the energy markets are stable
or stronger, like Friday, we are going to see the grain markets act
accordingly.  This will especially true this time of the year, when we don't
have a lot of new news hitting the grain markets.  The weather in So.
America remains very good for crop production with the forecast showing
continued good weather.  This will weigh on prices.  Exports are expected to
be strong this week and we get the new Commitment of Traders report this
afternoon that breaks out index funds and off-floor trades, trying to give a
more accurate view.

eCBOT market couldn't hold gains overnight, eventually selling off with the
March contract closing over 3 cents lower on decent volume.  Many traders
feel this is the week that we are going to see many of the funds either get
out of their positions or re-allocate their positions.  The consensus seems
to be the funds are not going to run from the grain markets, but they are
going to reduce their exposure.  We have already had a 30 cent break in the
corn market last week, so it could have already started, but nobody knows.
The funds will be the direction the market follows as we have no new news
this time of the year and they are just so big.  As we have seen the last
couple of months, the ups and the downs will be much more dynamic at these
higher price levels with the breaks and the rally's that much bigger.  I
look for the market to open lower today, but the bias seems to find user
support on any selling as many users still need to price in their needs as
they were caught with protection on the rally this fall.  Exports are
expected to remain strong this week and the Commitment of Traders report
released this afternoon is supposed to give the market a better idea of fund
activity.

Daily News:

6-10 Day Forecast: Above Temps East, Below West.  Normal to Above Precip.
The Corn Belt looks dry today. Tuesday into Friday will see periods of light
rain or snow flurries. Temps normal to below.

**** Gold trading higher this morning  $609.80  up  $2.60

**** Crude Oil trading higher $56.95  up .64  on talk from some  OPEC
members that Oil production may need to be cut  more than the scheduled
500,000 barrels per day in February.

**** Goldman Sacs lowered their 2007 average crude Oil price estimate to
$69.00 per barrel down $3.50 from their previous forecast. They cited warm
winter weather in the US.

**** Chinese Soybean, Corn and Oil futures closed higher, Oil lower.

**** According to many pundits this is the proverbial week  that Index Funds
will re-allocate their commodity mix and will sell out some of their
positions in grains.  Will need to keep a watch on open interest this week
to tell for sure.

**** Producers keep turning to the  9 month as a Corn marketing plan. As of
January 7th

the USDA shows Corn loans now stand at  902 mil.bu.  The last USDA S&D
report estimated ending Corn stocks at 935 mil.bu.  Looks like we will soon
surpass that number.

**** CFTC will release the Commitment of Traders report today.

**** Fund trade fairly slow on Friday.   Funds ended the day net buyers of
2,000

Corn contracts, Even Wheat and Meal.  Sold 700 Soybeans, 600 Oil.

**** Cash markets steady to  higher Thursday.

**** China's National Grain and Oils Information Center is forecasting 2007
Corn production

up 2% in 2007 at 145 mmt.  This compares to the 2006 estimate of 142 mmt.

**** China sold 663,926 mt. of Wheat from state reserves over the weekend.

**** India's government estimates Farmers have sown 7% more Wheat acres than
last year.  CIF Corn up 1-2 with  Jan. +28 to +30, Feb. +35 to +40. River
house bids steady to higher STL. up 1 at -1, Morris IL. River  up 1 at -16.
PNW Corn trains steady :  Jan. +64  Feb.  +67   Mar.  +70  CIF Soybeans
steady up 1 with Jan. +33 to +36, Feb. +40 to +44.  Processor bids steady
with pushes still being paid east and west.  CIF SR Wheat  steady off 2 Jan.
+10 to +16   Feb. +18 to +20

**** Barge freight steady weak  STL 200 - 215     IL. River  250 - 260
Ohio  240

**** BN rail freight  steady    Jan. -150     Feb. -200   Mar. -200

**** Soybean spreads: Term 600 SH/SN, Fimat 500 SN/SX, Tenco 300 SF/SH, JPM
300 SX/SN

**** Corn spreads: IA 1,000 CZ/CN, Rand 300 CZ/CZ7, 200 CN/CZ, ADM 200 CK/CZ

TREND:

The reversal back in corn on Fri came at a very important time. Corn has
just managed to break below the Dec lows and seems targeted at the 3.50 gap
left in the rally last fall. Informa issued their est for the final yields
the USDA will release next Fri taking corn yields down a half bushel. This
resulted in a  36 mil bushel reduction in total crop to 10.709 bil bushels.
This is almost 1.1 bil bu less than projected usage. They left bean yields
unch. Corn basis levels remain rather defensive with the board carries
widening back out all week. The H/N traded from 12.5 last week back to 16
this week. Full carry is 26. One has to question how close we will get to
that level. Demand has certainly stepped back up this week on the lower
futures prices. Not only are industrial plants reaching for supply but
export trade has picked up again with 530 TMT announced on the first major
break in corn prices. Half of that total was for new crop so take note the
world trade remains concerned about supplies for next year 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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