Linn Group Morning Corn Comment

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

The corn market rallied Friday on the back of the soybean and soybean oil
market as we saw both markets move higher on fund buying.  The funds were
back in the grain complex on Friday pushing beans and bean oil close to new
highs and funds bot close to 4,000 corn contracts by the close.  There
wasn't really any new news out in the corn complex and it just seemed like
the market moved higher with the beans.  Technicians liked that corn was
able to bounce off the $3.96 level and close strong.  This may sound like a
broken record, but the strong demand for corn from exporters and ethanol
producers is keeping the sellers from getting too aggressive, but the market
is already very long and that will drag on the corn market as it tries to
rally with beans.  After the close, marketing advisory service, Pro Farmer,
released a survey that had the US corn crop at 90 million acres this spring,
almost 12 million acres more than 2006.  Remember, this is only a survey and
like all statistics, you can work the numbers to say anything you want, but
it still a lot of acres.  Weather forecast in So. America remains hot and
dry, but it seems to be short lived and shouldn't be a factor in yields.

eCBOT corn market stronger overnight on the back of beans and the volume was
pretty light.  Only 6,900 contracts traded overnight, but the March contract
closed almost 3 higher.  I have to imagine a lot of Bears fans were too
depressed after the Super Bowl to trade Sunday night.  Both corn and beans
opened very strong with beans leading the way, probably on the back of the
Pro Farmer survey released after the close which reduced bean acres a lot
more than expected.  Everybody and their brother will be releasing planting
intentions for the next couple of months, and those surveys are highly
subjective and probably worthless.  The farmer will decide what he is going
to plant later this spring and don't think they are going to give accurate
answers to survey questions.  Looking at corn today, there is no new news
out, so corn will probably be a follower of the bean complex and I would
expect to find selling on any attempt to rally the corn market.  Beans and
the funds are the wild card once again, because if the funds come in to buy
the soy complex, we could see extended moves higher.

 eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH7                404^6    2^6                   407^0    403^4

ZCK7                417^2    2^4                   418^6    415^2

ZCN7                423^6    2^4                   425^6    421^4

ZCU7                408^0    0^4                   410^2    407^2

Early Opening Calls: 1-3 higher

Top News

-- United Kingdom sees first H5N1 bird flu case in turkeys, acc. to a
government official

-- National Cattlemen's Beef Association members voted on a renewable fuels
policy. The policy says the nation should push

for ethanol made of cellulosic feed stocks and not put any more Corn into
fuel production.

-- EIA:  November monthly ethanol production hits record 343,000 bpd; demand
at 414k bpd, still outstrips supply

-- Pro Farmer released the results of a survey that estimates 2007 US Corn
plantings will be  90 mil. acres vs. 78.3 mil. this past year. The survey
covered 23 states.

-- Funds swung to the buy side Friday buying: 5,000 Corn.

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

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

-- Volume was 182.6 with open interest up 4.1 to 1487.6

Cash Markets:

-- CIF Corn :  Feb. +35 to +37, LH Feb. +38 to +42 Mar. +40 to +45, Apr. +35
to +37, May +36 to +38, June +35 to +38

TREND:

Corn demand has rebounded on only a small break. Weaker basis levels helped.
That weakness in basis appears to have run its course. Starting to see basis
firm in the eastern markets. Could have an affect on the spreads once the
index fund role is out of the way next week? Flat price still has a
potential to blow up but seems to have done enough for the time being. $4.00
new crop is enough and farmers have responded with heavy new crop sales. New
crop basis levels have weakened in response to the new crop selling. If
there is a move into new highs again---for what ever reason---the bull
spreads will come back into vogue. It remains a safe synthetic long with
limited risk. Users taking coverage on weak days will continue to limit the
down side moves in this trade



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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