Linn Group Morning Corn Comment

CHICAGO - Jan 11/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market moved higher on Wednesday as we saw big fund buying during
day even though we had fund selling late in the day.  On the day, funds were
about even, but that comes on funds selling 6,000-8,000 contracts the last
20 min of the trading session.  Traders said the fundamentals are still
strong and the market was due a correction after the sell off the last week
or so.  Many traders had turned bearish the corn market on all the talk of
fund re-allocations, but the impact of the corn being such a demand market
finally gained momentum pushing it higher even in the face of fund selling
late.  Declining corn stocks and huge demand for corn from ethanol
producers, exporters and feed producers kept the corn market from falling
much lower after the opening on Wednesday.  Traders were nervous about
buying corn because of the funds, but the move higher yesterday in the face
of fund selling, should give the bulls renewed confidence in the corn
market.  BUT, with the release of the final 2006 Crop Production report
tomorrow morning, many traders may wait to become fully invested in their
positions.  Volume was very heavy again yesterday with technicians feeling
that even though corn had broken many of its moving averages yesterday, it
was in over sold conditions.

eCBOT market was very strong overnight on good volume as the March closed
over 10 cents higher overnight, on top of the 6 cent rally yesterday.  Big
news overnight was a USDA economist comments that US biofuel production
would surpass US corn production.  He estimates that the ethanol usage of
corn will be 1.0 billion bu. bigger than 2006 usage of 2.15 billion bu.  I
think these type of numbers, which may have been thrown around by grain
analysts over the last couple of months, finally hit home when the USDA
started talking about it.  This just shows how important ethanol production
is to corn and how tight this makes corn supplies.  These comments and the
fund buying yesterday probably are what fueled the rally overnight.  Traders
this morning also talking about some traders that are caught short this corn
market and will want to cover these trades if the market goes higher,
especially with the Crop Production report being released tomorrow morning.
Export sales were very strong with 06/07 sales at 1,176,900 and 07/08 sales
at 340,000.  Estimates were 500,000 to 700,000 which seemed very low
considering we had announcements last week for 700,000 - 1.0 mil.
Regardless, the strong export sales will be considered bullish the corn
market this morning.  Look for the corn to open stronger in line with the
overnight close, but the funds will determine where the market goes from
there.  If we do have traders caught short into the report, we could see
bigger buying that anticipated.  Remember, many analysts have been
flip/flopping on corn with many turning bearish the last week.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH7                370^4    10^2                  373^0    362^0

ZCK7                379^2    9^0                   382^4    370^4

ZCN7                385^4    8^4                   388^6    377^6

ZCU7                375^0    9^0                   375^0    366^0

Early Opening Calls: 7 to 10 higher

Top News

**USDA Corn 06/07 Export Sales Net: 1.176 mln mt; expected 500-700,000

-- Grain markets overnight rally on USDA's Keith Collins comments - he
raises concerns to Congress that biofuel production surpassing expected corn
production. He indicated a corn use level equal to a trend line yield of 152
bpa on a total planted acre base of 85.6 BPA.

-- China exports a total of 470,000 tons of corn in the month of December;
still down 64.1% on the year, to 3.1 mil total

-- China doesn't expect to stop corn exports beyond March, acc. to officials
- however, less export licenses may be allowed

-- Brazil gov't raises 06/07 Corn production to 44.7 mln mt vs. Dec
projection of 43.6 mln mt.  The latest projection compares to year ago
production of 41.7 mln mt., CONAB says.

-- Export problems in Ukraine is reducing supply of feed wheat - viewed as
supportive to US Corn exporters, acc. to traders.

-- Corn volume Wednesday 156,143 electronically and 110,029 pit. Open
interest was up 3,697.

-- Index Funds again showed up late in the Corn market selling 8,000
contracts late.  Funds ended the day Even Corn.

-- Corn spreads: Tenco 600 CN/CZ, IA 500 CK/CN, 500 CH/CN, UBS 300 CN/CZ

-- The Dollar is trading lower vs. the Euro, higher vs. the Yen.

-- Chinese Corn, Soybean, Meal and Oil futures closed higher.

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

-- Outside markets:  energies lower, metals higher

Cash Markets

-- CIF Corn :  Jan. +35 to +37, LH Jan. +37 to +40,Feb. +42 to +44, Mar. +47
to +49, Apr. +39 to +41, May +39 to +42, June +39 to +42

TREND:

There were two big moves today---corn gaining on wheat and the bull spreads
in corn gaining sharply. Neither should have been a surprise but one has to
question how far these spreads will move

Watch to see if CH can gap above 2.63 in the AM---if it does, we have some
new shorts in corn that will be running for cover. The fact that we tested
the gap at 3.50 and reversed away from it with an outside day is very
supportive. Looks very positive except that there is a crop report on Fri
AM.



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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