Linn Group Morning Corn Comment

CHICAGO - Jun 12/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market surged higher on Monday following the overnight action as
traders reacted to forecasts for hot/dry weather in the near term and the
limit move higher in the wheat contract.  KC and Chicago wheat traded limit
up for most of the day before Chicago closed just off the limit, thus
helping push corn higher.  The July and December corn contracts closed right
around 14 cents higher after almost touching the limit, 20 cents, higher
earlier in the session.  Volume was very heavy and funds were net buyers of
close to 15,000 contracts by the end of the day.  Traders built in a bigger
weather premium into the market as they become more concerned about the
dryer weather, especially in the eastern corn belt as forecasters keep
talking about a ridge building that will restrict rain and increase temps.
The market seemed to shake off the USDA supply/demand report that was
neutral/slightly bearish corn and concentrated on the weather forecast.
Rumors out of Beijing has China asking their big ethanol plants to back away
from using corn as a raw material because of the huge increase in
Ag-flation.  Interesting observation from the option pit, as the implied
volatility was neutral to lower when the market was surging higher.  One
option trader said it was very unusual for the implied volatility to not
follow prices this time of year.

eCBOT market was a little lower overnight setting back after yesterdays
rally and the USDA release of the crop condition report yesterday after the
close.  The July closed 2 ¾ lower and the December was 3 ½ lower as traders
look to take some profit.  The USDA crop condition report yesterday showed
the corn crop 77% good/excellent which is down 1% from last week, but still
above the 5 yr average.  This will weigh on the corn some because many
traders were looking for a 1-3% decline, but traders are already talking
about next weeks report showing a lower rating.  Weather remains the focus
for the corn market and will probably dictate the direction of the corn
market as traders will be very nervous about a problem with the corn crop.
Different farmers we have talked to are saying that they are doing ok, but
they need some rain or will need rain in the next week.  The only saving
grace of the next week is that temps are in the mid to upper 80’s and not
the lower to mid 90’s which can do a lot more damage a lot quicker.  We see
the corn market opening lower, in-line with the eCBOT night session, but the
weather forecast will dictate market direction.  There has been a lot of
flip, flopping in the weather forecast over the last couple of days, causing
markets to be confused.  Unless the weather forecast brings rain into the
near term forecast, we feel it will be hard to break corn very much.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCN7                393^2    -2^6                  394^4    391^2

ZCU7                401^0    -4^0                  402^2    399^2

ZCZ7                 402^4    -3^4                  404^2    400^6

ZCH8                411^2    -4^2                  413^6    411^2

Early Opening Calls: 1 to 2c lower

Top News

Corn Progress & Conditions Mini-Recap

Corn % Emerged:  99%; 94% week ago; 97% yr ago week; 95% 5 yr avg.

Corn Crop Conditions Latest: VP= 1; P= 4; F= 18; G= 57; EX= 20

Corn Crop Conditions Prior Wk: VP= 1; P= 3; F= 18; G= 60; EX= 18

Corn Crop Conditions Yr Ago Wk: VP= 1; P= 5; F= 24; G= 55; EX= 15

-- 50,000 tons of Chinese was corn was purchased by Nonghyup Feed Inc., of
South Korea, according to traders.

-- Monday's USDA 06/07 Corn Inspections:  27.861 mil bu, expected =
35.0-40.0, previous = 37.242 mln bu.

-- South Dakota ethanol firm Lake Area Corn Processors to join Iowa's
Countryside Renewable Energy in a 100% merger, acc. to a company statement

-- South African government holds white corn estimates relatively steady at
7.05 mil due to better than expected harvests in one province off-setting
losses in several others, acc. to gov report

-- CWB single-desk barley monopoly slated to come to a close August 1st,
acc. to Canadian gov sources

-- Total 2007 Polish grain production pegged at 27.6 mil tons total, +27.2%
increase from previous estimates, acc. to private analyst Grain Chamber

-- Total 2007 Polish grain production pegged at 27.6 mil tons total, +27.2%
increase from previous estimates, acc. to private analyst Grain Chamber

-- Dalian Corn futures settled lower along with lower eCBOT futures

-- Funds came after all the markets Monday buying 13,000 Corn.

-- eCBOT Vol: 215,540; Pit Vol.: 108,910; Open Interest change: +5,395

-- Weather: Normal to Below Temps West, Above East. Normal to Above Precip.

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

Cash Markets

-- CIF Corn:  June +33 to +36,  July +38 to +39, LH July +40 to +44, Aug.
+38 to +42, Sept. +38 to +41, Oct. +37 to +40, Nov. +38 to +40, Dec. +42 to
??

TREND:

Corn was pulled along as we finally closed over $3.90 on July which could
shake off this 2 ½ month range trade. Look for short term liquidation in
this $3.95 to $4.00 range. However, a 2nd close would trigger a run to
$4.10. Meanwhile, December already handled that area late last week as we
sustain a new high close over the $4.01 May highs. We’re getting overdone
here but look for support against the $3.90 to 3.95 area. Holding the gap
would project a run for the contract highs over $4.20. Expect buying against
this old range which has now become a base of support for the corn market.
Looked for ways to take off some corn length on this extreme strength
today---sold calls and bot in short puts where appropriate



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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