Linn Group Morning Corn Comment

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

The corn market yesterday once again found active fund and local selling
after it tried to go higher.  The market also found stops in the March after
trading below the $3.96 level.  Funds were estimated to have sold close to
5,000 contracts by the end of the day taking the open interest lower.
Volume was pretty big, but much of that was from very active spreading.
Traders estimated close to 50,000 H/K spread and another 35,000 done on the
eCBOT platform.  Traders said the locals jumped on the March contract traded
below the $3.96 level which is the lowest the corn market has been since the
release of the Jan 12th USDA final production report.  The huge long
position by investment funds is acting as an anchor on the corn market
without any fresh news to help it go higher.  The demand by the ethanol
industry can only carry this market so far as it seems like the market wants
to talk about adding corn acres every day.  Some concern among analysts that
the export and feed demand will slow down at these high prices and that is
wearing on the market a little.  Weather remains a non-issue in the Midwest
and So. America.  Soybeans are still the leader in the grain complex and
corn is losing ground to soybeans as the corn/soybean spread adjusts from
the historical high price of corn.

eCBOT market was a little higher overnight as corn got some support after
the sell off yesterday.  After closing over 4 cents lower yesterday, the
March was up almost 2 cents higher.  Weekly export sales were very strong at
917,400 when the estimate was 450,000 to 650,000.  This will be a pretty
good surprise to the market this morning and had one trade scratching his
head wondering if corn prices would go high enough to discourage
consumption.  Export sales remain very strong and there appears to be no end
in sight, especially with lower prices this week.  The corn market should
open higher this morning based on last night's action and the good export
sales this morning.  Look for more spreading today as we are just in the
beginning of the Goldman roll and it could give a slight negative feel to
the market.  Nothing has changed in the corn market as it will have trouble
going higher and should find selling on an attempt to rally.  Tomorrow's
release of the USDA supply/demand report will keep some traders out of the
market and some position squaring before the close.  Look for this action to
cause some increased volatility.  This time of the year is usually a down
time for the grain markets and historically a good time to buy options in
anticipation of the spring plantings.  Look for the market to open higher
this morning, but have trouble rallying.  The USDA report tomorrow isn't a
big report, but the market is looking for any news.  Be careful of the
funds, especially if they start buying beans because corn will follow.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH7                394^0    1^6                   396^2    392^6

ZCK7                406^0    1^4                   408^0    404^6

ZCN7                413^0    2^0                   415^0    411^0

ZCU7                401^0    2^0                   402^6    398^6

Early Opening Calls: 1-2 higher

Top News

**USDA Corn 06/07 Export Sales Net: 917,300 mt; expected 450-650,000

**USDA Supply/Demand Report Friday Morning

-- Brazil's CONAB:  06/07 corn production to reach 47.9 million tons, +7.2%
from earlier estimates, +12.7% higher than last year

-- Ag Canada:  Canadian 07/08 corn production +18.7% to 11 million tons
produced total - farmers switching production from wheat to corn it appears,
acc. to analysts

-- Canadian bull diagnosed with Mad Cow Disease, the country's ninth case -
animal was fairly old and was suspected of consuming infected tissue early
in its life

-- Brazil expecting a 10% jump in ethanol production for 2007, which would
give them a total production number of 4.5-4.75 billion gallons - lower
sugarcane prices and high international demand for biofuels cited as reason
for growth, acc. to Brazilian government

-- Water scarcity as growing concern in China - gov't officials create
controls on corn-to-ethanol projects to limit water resources for fuel at
the expense of food.

-- Chinese Corn futures closed down 3 to 5 Thursday.

-- Volume was 317.4, with open interest down 6.9 to 1478.9

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

Cash Markets

            Bean Barge       Corn Barge        SRW Barge       HRW Track
Ill Riv Frt

Spot                             +44/

Feb       +30/34 H           +41/45 H           +12/18 H           +70/75 H
375

Mch      +30/36 H           +43/45 H           +18/23 H           +74/80 H
330

Apr       +19/25 K           +35/38 K           +10/ H              +70/75 K
320

May      +19/25 K           +36/39 K
+70/78 K           310

Truck                Beans   Corn    Wheat              Meal Hi-pro
Oil

Chicago                       -29 H    -17 H   -43 H

Toledo              -30 H    -20 H   -45 H

Dec ILL            -18 H    - 2 H                           -15 H
-225 H

TREND:

Market has one more day to trade in front of the crop report on Fri morning.
It is not an important report but could give some surprises because trade
does not expect much? It has been unlike the USDA to make major changes in
this report.

Wheat remains the weak sister here. When we do get through 4.50 the next
down side move should go to around 4.25. Still favor KC or Mpls longs over
Chi. Wheat also continues to lose to corn---but take care pressing here with
cash wheat now cheaper than corn at the gulf

Corn feels ready to come out of the range to the down side. Support in Mch
at 3.90 to 3.85 if we do break down out of the recent range. New crop Dec
could go back to  the 3.75 level

Beans into new highs again today before falling back. Weekly chart top at
7.50 has slowed the gains but taking that out should solidify daily chart
counts to 8.00 to 8.20. New crop counts go to around 8.40.



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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