Linn Group Morning Corn Comment

CHICAGO - May 16/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market rallied on Tuesday on the back of weather worries here in
the eastern Midwest and in China.  The July contract closed 8 ½ higher and
the December closed 7 ½ higher at the end of the day, a little off their
highs.  Even with the forecast for rain across most of the Midwest the next
couple of days, the weather forecast is for dryer weather and what looks
like the beginning of a La Nina pattern which is hot and dry.  These
forecasts are making some traders very nervous as crops are in the early
stages of development and domestic and world demand is dependent on a huge
US corn crop.  Traders seem to be past the point of being worried about corn
getting in the ground, but now are focused on getting the yields they need
to meet demand.  Volume was light to moderate with funds buying close to
5,000 contracts.  Traders said the corn market seems to be in a trading
range after bouncing off the lower end of the trading range again yesterday
in the July.  Export news overnight had Taiwan looking to buy corn from So.
America instead of the US because of rising US prices.

eCBOT market was relatively quiet overnight as we had both the July and
December down a couple overnight.  Rain across most of the Midwest provided
much needed rains for parts of the eastern corn belt.  Weather remains the
main focus of attention for traders as forecasters are talking about the
further development of a La Nina pattern that provides for hot/dry weather
across the Midwest for the growing season.  Traders this morning seem to
think we could see a pull back off of yesterday’s rally, but it seems
everybody is hesitant to sell the market.  Remember, nothing has changed in
the corn market, the demand is still very strong and there aren’t many other
sources for corn and the US needs to grow a huge crop to keep up with this
demand.  More talk about China growing areas being very dry and no rain
forecast in the near future.  Look for corn to open inline with the close
overnight and look for direction.  Beans could be a leader today and if
beans are stronger, it will be hard to keep the corn lower, especially with
the spread activity we have seen lately.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCN7                369^2    -2^2                  372^4    369^0

ZCU7                375^4    -1^0                  377^2    374^2

ZCZ7                 376^4    -2^0                  379^6    376^0

ZCH8                388^2    -1^4                  391^2    388^2

Early Opening Calls: lower 1 to 2c

Top News

-- Argentine government estimates 66% of the country's corn crop had been
harvested;  this represents -18% off last year's pace, +7% over last week's
progress  -  delays due to rainfall reported

-- Bulk freight rates again reach record highs:  +6% this week;  rates
likely to stay fairly firm due to strong continued demand, acc. to brokers

-- Brazil President says to become reliable ethanol supplier to world
markets, his country should build a stock pile of ethanol

-- Iowa State University publishes report insisting cellulosic ethanol not
viable economically

-- Despite rising gasoline prices, White House says there are no plans to
access Strategic Petroleum Reserves to lower pump prices.  This come just a
day after the head of the EIA says the gov't will wait until after the
summer driving season to fill the SPR.

-- Merrill Lynch commodity analyst sees high commodity prices lasting
another 5 to 10 years, believes agriculture prices at just the beginning of
a cycle of higher prices.  Also sees petroleum prices taking off next year.
A managing director of Merrill also sees base metals prices continuing at
higher prices into the future, according to a Reuters story.

-- Dalian Corn futures were higher in overnight trade.

-- eCBOT Vol: 141,014; Pit Vol.: 48,214; Open Interest change: +6,746

-- Outside markets. Energy lower; US $ higher against both Euro & Yen; Gold
& Silver lower

Cash Markets

            Bean Barge       Corn Barge        SRW Barge       HRW Track
Ill Riv Frt

May      +3/6 N             +29/30 N             +6/?? N           +60/ N
225

June     +7/10 N             +32/33 N             +5/?? N           +60/ N
245

July      +14/17 N           +37.5/39 N          +6/?? N           +60/ N
265

Truck    Beans  Corn    Wheat  Meal Hi-pro        Oil

Chicago            -35 N   -5 N     -40 N

Toledo   -30 N   -8 N     -55 N

Dec ILL -26 N   -5 N                  -10 N              -200 N

TREND:

The corn market had another violent reaction to the lows under $3.60 with a
reversal as we start to lose some of our downside momentum. However, the gap
near $3.76 is the key to possible lows after last week’s spike under $3.55
and the May expiration this week.  Weekly charts show the $3.40 to $3.50
area as major support so can’t press the short side any longer for much
more. A close over the gap would run back into the $3.90 to $4.00 range.
December is bit stronger but would prefer July try to lead this rally. For
the moment though, we do have the potential to run back to $4.00 on Dec.
rather quickly. A close over $3.84 should be enough to stage that rebound.
This is leaving the $3.65 to $3.70 area as support. We should see buying
against these May lows in the corn market.



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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