Linn Group Morning Corn Comment

CHICAGO - May 14/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market rallied back with the new crop December leading the way
after the release of the USDA stocks report on Friday morning before the
opening.  The July contract closed almost 15 cents higher and the December
closed 18 cents higher.  The ending stocks number the market was looking for
was 1.2 bil and the USDA released their estimate of 947 mil on a reduction
in yield from the trend line and they kept the harvested acres the same.
Some traders are scratching their heads that there wasn’t a reduction in
acres after the flooding in the western corn belt and feel there may be
another reduction.  Old crop stocks were actually raised by the USDA because
of a decease in the exports, but some traders think this may have been
premature with the release of 55 mmt in sales the last 2 days.  Traders also
said the corn market was poised for a bump technically and the fresh export
news out of So. Korea Thursday night.  So. Korea countered the export news
on Thursday night by saying these were not new purchases, but deals done in
the past that are being reported twice by the USDA.  Japan was into the US
buying corn as well.  Volume was moderate to heavy at app. 205,000 contracts
and funds were very active, buying 12-15,000 contracts.

eCBOT market was relatively quiet overnight with the July and December
closing app. 1 ½ lower in the middle of the overnight range.  Traders this
morning will now focus their attention on the release of the USDA crop
progress report today after the close with most estimates at 65-75%
completed vs. 77% 5yr average and 85% last year.  Also, some talk of having
to replant corn that was planted back in April, thus increasing the
possibility of decreased yields.  This is only a possibility because much of
the replanting was done last week and over the weekend, but it is still
planted later that the 3-4 weeks ago as originally reported.  The corn
market should have trouble rallying into new highs with the spring plantings
close to the 5yr average.  Commitment of Traders report on Friday after the
close showed a big reduction in spec longs, thus possible catching some
traders too short into the USDA report on Friday.  We look for the corn
market to open inline with last nights close, 1-2 lower, and then look for
direction.  USDA will report crop progress tonight and that will hold
traders attention because it seems to be a foregone conclusion that seedings
has completely caught up from the being so far behind the last couple of
weeks ago, this is especially true in the Eastern corn belt.  If this is not
realized in tonight’s report, this could be a big surprise.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCK7                357^0    -4^0                  361^0    357^0

ZCN7                367^4    -1^6                  369^2    365^0

ZCU7                371^0    -2^2                  374^0    369^4

ZCZ7                 373^0    -1^4                  375^0    370^6

Early Opening Calls: 1 to 2c lower

Top News

-- USDA reports 06/07 private corn sale of 120,000 mt to Egypt

-- Analyst expect plantings of corn to be near 5 yr avg of 77%.  Year ago
plantings in same week were 85%.

-- Funds turned aggressive buyers of Corn and Soybeans Friday buying 15,000
Corn contracts.

-- India ‘s Farm Minister told reporters at a farm research meeting that
India may import 4 to 5mmt. of Wheat this year to build stocks for
emergencies.

-- Dalian Corn futures Sept contract closed higher, other months also closed
higher.

-- eCBOT Vol: 150,278; Pit Vol.: 55,604; Open Interest change: +5,151

-- Weather: Normal to Above Temps. Normal to Below Precip.

-- Outside markets. Energy complex higher; US $ lower vs. Euro, higher vs.
Yen; Gold higher & Silver lower

Cash Markets

-- CIF Corn:  May +25 to +27, LH May +26 to +28, June +29 to +31, July +34
to +36, Aug. +36 to +40, Oct. +33 to +36.

TREND:

The report appears to have caught at least part of the industry short
corn---this applies to cash as well as futures. Futures traded near limit on
the day closing at the high up 18 cents in CZ.

The domestic cash corn market has tended to firm all week as the lack of
farmer selling has truck bids firming---to such an extent that many of the
rail shippers are trying to buy back deferred rail sales to take advantage
of more immediate truck needs. This strength has originated in feed and
industrial uses. Farmer is notoriously hard to buy from while he is
planting---but delays, reduced stands, and a general concern that the spring
has been less than kind to corn farmers has him holding even more tightly
than normal.

We hear of crusting and lot of work with a rotary hoe to help corn break
through a crush caused by heavy rains on corn that was already planted. This
means a lot of corn that went in the ground on Apr days will now be more
like May 15 days. This can be damaging to yields based on the summer weather
conditions---at best put in harms way but this does not always mean a
reduced crop. The problem may be in reduced stands in many areas where
germination or emergence has been poor---it is widespread. There are always
puddles in many corn fields but I suspect these will be more evident than
normal in months ahead as we see just how much of the holes have corn
planted

The insurance program this year could tend to have many of the farmers in
the flooded areas of the west looking at taking a prevent plant payment
rather than rushing to put beans in failed corn ground. Too many will see
payments of $300 to 350 an acre due to the $4.06 CZ level for the insurance
program.



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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