Linn Group Morning Corn Comment

CHICAGO - Jan 17/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market rallied to 10 year highs in the March up the limit again, 20
cents, before closing well off the highs when the market ran out of momentum
and traders took profit after the 40 cent run up we have seen the last 2
days.  The USDA report on Friday has scared the market and probably cemented
farmers into planting huge corn acres this spring, with the acres probably
coming from beans.  Volume was huge on Monday, almost 500,000 contracts and
open interest was up almost 25,000 contracts.  Funds were very active with
traders estimating funds bot 11,000 contracts, but index funds selling
16,000 contracts at the end of the day.  The recent moves in corn and beans
have probably digested the USDA report and with the next USDA report not
until March 31st, the market will look to other factors for direction.  The
March 31st report will report planting intentions and there will be much
speculation by the "experts" between now and then.  Weather remains good in
So. America and the moisture received in the Midwest over weekend added much
needed soil moisture which will help set up a good planting season.  Some
talk about the profitability in ethanol production as the price of corn goes
higher, but many are forgetting about the reduction in natural gas prices
over the last year, the single biggest cost, and the increase in DDG prices.

eCBOT market was stronger overnight on pretty big volume with the March
contract closing 4 cents higher.  The index funds came in and sold the corn
market the last 20 min of the day yesterday so the move overnight is
probably the bounce from the index funds.  Corn is still in a demand market
but it is now grappling with supply issues as the USDA report highlighted.
The demand by exporters and ethanol remains strong and will hold the corn
market higher regardless of no new news.  Goldman Sachs released a report
that said the fair value of corn is $3.95.  The margins were raised in corn
as of the close Tuesday, so accounts will start to be squeezed today and
that should add some volatility to the market.  Technically, the corn market
looks excellent and should remain that way with the chances of a major
setback are minimal.  Look for the market to open 5 higher today inline with
the eCBOT market close and remain strong through the day unless we have more
index fund selling.  In case you forgot, Friday and Tuesday reminded you
that we are in the middle of big markets, probably bigger than most traders
have seen and these markets are very volatile and ranges will be big.  Hold
on.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH7                407^0    4^0                   410^4    402^4

ZCK7                418^0    4^2                   421^0    413^0

ZCN7                426^0    4^4                   428^4    420^0

ZCU7                407^4    8^0                   410^0    397^2

Early Opening Calls: 5 to 7c higher

Top News

-- Exports: Taiwan tendering for 50,000 mt. Corn and 14,000 Meal for March.

-- Goldman Sachs report yesterday suggested fair value for Corn is now
$3.98, up 30 cents from their previous estimate. They cited US ending stocks
standing at 23 days of use and world stocks at only 43 days use.

-- Reportedly the State of the Union address next week likely to call for
increased US ethanol production to 60-bln gallons by 2030; current law set
at 7.5 bln by 2012.

-- Huge volume of trade in Corn Tuesday with the preliminary report showing
284,078 contracts trading electronically and 190,386 in the pit. Open
interest was up 26,588 in Corn.

-- Fund trade a mixed bag with regular Funds buying 13,000 Corn contracts,
reportedly index type funds came in late and sold 16,000 Corn.

-- Corn spreads: JPM 500 CZ/CN, Rand 500 CZ/CN, Tenco 400 CH/CK

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

-- Volume was 488.9, with open interest up 26.6 to 1450.7

-- Outside markets:  metals and energies lower, dollar mixed against
currencies

Cash Markets

-- CIF Corn:  Jan. +25 to +35, LH Jan. +27 to +34,Feb. +36 to +39, Mar. +42
to +44, Apr. +37 to +40, May +37 to +40, June +37 to +40

TREND:

The spark in corn may not be quite as bright tonight on the close. However,
there remains a lot of power here. Look for CH to be pretty well supported
at 4.00 to 3.90. Pick a spot and be counted again. May take a while for the
market to find a reason to get back up through the highs---lot of the trade
talking about 5.00 corn but we should see the market spend some time between
4.20 and 3.85  on  a front month. Make no mistake that the rally in corn
this week cemented larger corn acres this spring unless there is a change in
other markets to buy some back?



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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