Linn Group Morning Corn Comment

CHICAGO - Jan 18/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market surged into new highs on Wednesday before closing well off
the highs as we once again saw index fund selling coming into the market.
The March contract reached a new 10 year high before closing 12 cents off
the highs as index funds sold 10,000 contracts in the last 10 min of the
day.  Besides the index funds, other funds had bot 10,000 contracts earlier
in the day.  The demand for corn by ethanol producers remains the leading
catalyst and the news maker driving corn prices, with the demand used for
feed and by exporters adds to the demand.  Volume was once again very big,
but not near the Tuesday levels.  The corn market will remain strong and
volatile through at least 2007 says many traders.  The corn market will
remain tough to call and uncertainty and differing opinions on what the
markets are going to do will dominate.  Rumors today had new money coming
into commodity funds and that was the reason for the rally early in the day
and talk about President Bush making ethanol a key note in the State of the
Union speech next week.  On the bear side of the market, a major grain
analyst speaking at a Biofuel conference here in Chicago yesterday was
quoted as saying corn prices could be down to $3.00 by the end of the year
if significant corn acres are added, as expected, and the yields follow the
trend line.

eCBOT corn market was stronger overnight recovering from the index fund
selling that happened in the last 10 min of the day yesterday.  March corn
closed 7 cents higher, recapturing most of what was lost on the close
yesterday.  Weekly export sales will be released tomorrow because of the
holiday on Monday.  The corn market remains very strong and the funds are
leading the way as we have seen divergence the last couple of days with the
trend/CTA funds buying futures and the Index fund re-allocation selling
futures.  Many traders feel that yesterday was the last day of index fund
selling, but nobody knows for sure, it could be just one person starting a
rumor and everybody else repeating the same story.  News out of the Far East
has Taiwan not buying any Chinese corn over the last month despite them
lifting the ban and the 10 year high prices of US corn.  The corn will
remain very volatile and creates opportunity for profit and opportunity to
lose all your money.  I would expect the corn market to open higher today
and try and make a run at the highs from yesterday.  Synthetically on
Friday, March corn traded $4.23 and I think that number is in the back
traders minds, but we may have already reached that level with yesterday's
high.  I look for the corn market to open higher inline with the close on
eCBOT but we could find more buying if we are seeing new money come into
these commodity funds.  Look for corn to have trouble if we get up to the
$4.25 area in March, but as usual, the funds will lead any direction.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH7                415^4    7^4                   416^2    411^0

ZCK7                427^0    8^0                   428^0    422^0

ZCN7                433^6    8^0                   434^0    427^2

ZCU7                412^0    6^4                   412^0    405^0

Early Opening Calls: 5-7 higher

Top News

-- An analyst from Informa told a group in Chicago Corn prices could fall
below $3.00 per bushel by the end of the year if the crop produced trend
line yields and there was a significant expansion in  Corn plantings

-- The Argentine government issued a report raising the area planted of Corn
to 3.5 mil. hectares vs. 3.45 mil.

-- Stratagie Grains:  2007's grain crop to be +9% better than 2006 - 284.9
million tons, less than 1% higher than previous estimates, with wheat
posting 10% gains to 119.1 mil tons

-- Strain of H5N1 bird flu found in Egypt is beginning to show resistance to
some common antiviral treatments, such as Tamiflu, according to the WHO

-- Funds all on the buy side Wednesday buying: 10,000 Corn, while index
funds were said to have came in late and sold 10,000 Corn contracts

-- Big volume corn trade, 182,134 Corn contracts traded electronically and
131,705 in the pit.  Open interest  up 7,934 contracts.

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

-- Malaysian palm oil virtually unchanged overnight in mixed trading;
waiting for key export data to determine future direction, acc. to traders

-- Corn spreads: Man 700 CU/CZ, JPM 300 CZ/CU, Citi 400 CZ/CZ7, Fimat 400
CK/CH

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

-- Volume was 321.7 with open interest up 7.9 to 1458.5

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

Cash Markets

-- CIF Corn :  LH Jan. +30 to +35,Feb. +37 to +41, Mar. +42 to +46, Apr. +38
to +40, May +38 to +40, June +38 to +40

TREND:

Lot of power in corn? Thought I was going to have to eat crow if we got
above 4/20 again.  Look for CH to be pretty well supported at 4.00 to 3.90.
Pick a spot and be counted again. May eventually get through the highs and
5.00 to 5.50 would be the results.

Wheat has gotten cheap enough relative to corn---too man y areas where hard
wheat is now competitive for feed use. Some areas will never be harvested
with the acres grazed out now that corn has gotten so expensive. Feeding of
soft wheat on the east coast and feeding of wheat along the west coast both
looked very competitive today due to high freight cost on corn.



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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