Linn Group Morning Corn Comment

CHICAGO - Apr 3/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Corn was down the limit move of 20 cents again most of the day yesterday but
closed just off the lows after beans dragged corn higher.  Besides the
higher move in beans, there was probably bargain hunters and technical
buyers coming into the corn market.  The December contract led corn higher
which shouldn’t surprise anybody as the crop being planted this spring is
still in question, regardless of what the government and the “experts” are
estimating the farmers are going to plant.  The market got the expected fund
liquidation that didn’t happen on Friday with corn market limit down.  Funds
sold app. 20,000 contracts and open interest is up 40,000 over the last 2
days, which implies new shorts.  Most traders feel the break is healthy and
should encourage the increase in demand and so an increase in exports.
Traders will be very interested in the commitment of Traders report released
on Friday.

eCBOT market was pretty quiet overnight as we saw the market trade slightly
higher and close almost 3 higher in the May and 2 ½ higher in the December.
Technicians said the corn market was over sold and due a bounce and we had
users in the corn market at the end of the day finally feeling the break was
over done and they were comfortable buying corn.  Weather remains the focus
for corn and probably preventing the corn market from being really sold hard
as we still have very little corn planted and the short term forecast is not
conducive for corn planting, but it is still early.  Long term forecasts are
more supportive of corn planting, but traders will be very short term with
the need to plant so many acres.  There is still the potential for a huge
corn crop, but too many variable remain unanswered for the funds to take an
aggressive short position and demand remains very strong.  There are a lot
of new ethanol plants coming online this summer which will create even more
demand.  I look for corn to be quiet today and the market should try and go
higher, but it will run into selling if it gets 5 higher, especially in the
May and July.  Bear spreads are still a big trade, especially the Z/N, but
be careful, if we get any type of weather scare or new demand, the July will
come back with a vengeance and bite back.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCK7                357^4    2^6                   357^6    355^0

ZCN7                369^2    2^6                   369^4    366^4

ZCU7                369^2    3^0                   370^0    367^0

ZCZ7                 372^0    2^4                   372^6    369^0

Early Opening Calls: 2 to 3c higher

Top News

-- UN's FAO expects total world grain production to rise +4.3% to 2,082 mil
tons with corn seen as the big gainer, rice up as well

-- US Ethanol production in the month of January reaches new record: 375k
barrels per day; demand still stronger at 414k, acc. to ethanol industry
sources

-- Southern corn planting progress doing well. Latest Planted acres vs. avg:
Texas 56% vs. 53%; Ark. 70% vs. 33%; La. 89% vs. 58%.

-- South Korea - US trade deal the largest in 15 years;  expected to help
meat producers, US/Korean auto industries - although US auto executives say
pact falls short of expectations

-- Dalian Corn futures were higher overnight.

-- Corn spreads: Fimat 4,000 CN/CK, 2,000 CK/CN, JPM 3,000 CZ/CN

-- eCBOT Vol: 260,405; Pit Vol.: 156,864; Open Interest change: +17,543

-- Funds sold 20,000 Corn, 4,000 Wheat. Bought 8,000 Soybeans, 5,000 Meal,
3,500 Oil.

-- Weather: Below Normal Temps. Below Normal Precip, 6 - 10 day shows.

-- Outside markets: crude oil futures lower; US $ slightly higher vs. Euro;
higher vs. Yen; Gold & Silver lower

Cash Markets

-- CIF Corn:  Apr. +22 to +25, May +31 to +34, June +26 to +28, July +32 to
+36, Aug. +?? to +34, Oct. +27 to +35.

TREND:

Market feels like it has done enough liquidation even though the open
interest is not down yet? The spreads also feel as it they could continue to
weaken. Lots of air above the trade so one has to assume rallies will be met
with selling in corn. The chart is badly damaged. Takes a weather problem to
resurrect ideas of higher prices. Demand will resurface but do not think
this is enough to get any rally started. However, 3.50 corn is cheap enough
at current fundamentals and we should see users take sway in where prices go
now---they will also slow activity if we rally back too fast. There are a
lot of farmers out there that would like a chance to sell 4.00 corn again so
we will also have that on the rallies



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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