Linn Group Morning Corn Comment

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

The corn market closed mixed on Monday on a relatively quiet day after the
initial opening.  Good growing weather kept pressure on the corn market but
a jump in soybean prices helped keep corn from breaking down.  Fimat was
also a big buyer of bull spreads, helping keep corn prices from selling off.
With the release of the acreage estimates on Friday, soybeans will remain
the market leader in the grain complex for the near future.  Volume was
relatively large, by there was a lot of spread trade.  Funds were net
sellers of close to 2,000 contracts.  The corn market will remain very
volatile because of the high demand fighting the excellent growing
conditions.  The weather remains very benign and should have minimal affect
on prices in the near term.  Many traders are waiting for the pollination
phase to start happening across some the big growing areas.  Vice Chairman
of Jilian Grain Group in China says Beijing is expected to allow more
exports later this summer, probably August, as the drought isn't as bad as
first reported.  Funny, but our contacts in China told us on Friday that
their corn buyers are starting to get nervous because the drought is worse
than anybody knows.  It is not uncommon for official Chinese officials to
put our disinformation.  Time will tell who is going to be right, but the
demand for corn by China is insatiable.

eCBOT market was lower overnight after the mixed close yesterday and a lower
soybean move overnight.  Crop condition report released after the close
yesterday showed good/excellent unchanged from last week, but some
individual states were up.  Illinois good/excellent was up 10% from last
week on top of an increase of 13% the previous week which will considered
bearish because of the amount of corn grown in IL.  IA, another big corn
producer, was down 2% good/excellent from last week on drier weather in
western IA with some traders starting to get concerned.  See the complete
details of the crop condition report below.  I would expect to see a
relatively quiet day today with many traders on and off the floor taking
time off with the holiday tomorrow and the grain market really the last
market open today as many markets are closing 12 noon CST.  We could still
see a volatile trade today, but it would be because of a lack of trade as
compared to something pushing prices higher and lower.  Corn is a follower
in the grain complex and if corn or beans breakdown or rally, corn will
probably follow.

Have a Happy and safe 4th of July.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCN7                327^0    -3^4                  330^6    327^0

ZCU7                337^4    -2^2                  341^4    336^6

ZCZ7                 346^6    -3^2                  351^2    346^6

ZCH8                362^0    -2^2                  365^0    362^0

Early Opening Calls: 1-2 lower

Top News

Corn Progress & Conditions Mini-Recap

Corn % Silking:  13%; 4% week ago; 9% yr ago week; 9% 5 yr avg.

Corn Crop Conditions Latest: VP= 2; P= 5; F= 20; G= 53; EX= 20

Corn Crop Conditions Prior Wk: VP= 2; P= 5; F= 20; G= 54; EX= 19

Corn Crop Conditions Yr Ago Wk: VP= 3; P= 6; F= 23; G= 51; EX= 17

===================================================================

-- USDA Corn Inspections: 34.188 mln bu.; expected 34 mln

-- Argentine corn harvest reaches 94% complete, behind last years pace by
-2% - record 22.5 mil ton production anticipated, acc. to BAGE

-- Britain's farmer union calls on EC to discontinue crop set aside rules
for the 2008 crop year by Sept giving farmers time to adjust their upcoming
plantings.  Union claims all ag industry producers & users hope the EC
follows their suggestion of abolishing set aside rules in light of this
years drought hit crop.

-- Chinese stats bureau chief economist suggests country's 2nd half 2007
surplus in trade growth will fall as a result of scraped or reduced tax
rebates local exporters had been receiving

-- Dalian Corn futures higher overnight.

-- Fund trade moderate Monday. Funds sold 2,000 Corn.-- eCBOT Vol: 199,925;
Pit Vol.: 94,214; Open Interest change: +861

-- Weather: Normal Temps.  Normal Precip. The Northern areas of the Corn
belt will see chances of scattered showers and thunderstorms today.

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

Cash Markets

--CIF Corn:  FH  July +40 to +43, LH July +42 to +45, Aug. +45 to +48, Sept.
+45 to +46, Oct. +39 to +42, Nov. +40 to +44, Dec. +44 to +47

TREND:

Last week we started talking about the volatility in corn melting away---has
lost over 40 cents off the highs in the last two weeks. The chart below
shows just how fast this has taken place. The chart is over layed with new
crop beans. Selling the CZ 350 straddle will still offer some comfort in a
down side correction to bean longs.

The trade today in managed to confirm the reversal from last week and should
lead to a further break in Chi to around 5.70 to 5.60 to test that gap and
the 50 pct retracement of the last rally.

Corn may not participate quite as hard with the wheat/corn spreads still
correcting but the Dec may go down to test 3.30 to 3.25.

There will be a lot of selling over both those markets on small rallies
tomorrow



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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