Linn Group Morning Corn Comment

CHICAGO - Jul 18/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was down hard again on Tuesday as the weather man seems to
just keep putting out bearish forecasts and there is nobody or no reason to
step in and buy the corn market.  The current weather forecast calls for
more rain across the whole state of IA with some of the dry areas getting
rain when those areas were going to be missed just a day or so ago.  That
was the big surprise, the dry areas of IA getting rain.  The December
contract closed almost 12 cents lower after being almost 18 cents lower as
beans really took another hit and corn followed it lower.  The corn market
is in the middle/end of its key pollination stage and it is receiving much
needed rain, good temps, and heat coming next week.  As we all know, when
you get some rain and then heat, things really grow well.  Some analysts are
estimating that 70-75% of the corn belt is in excellent shape and 25% is in
trouble, so the good will eventually outweigh the bad.  Volume was
relatively heavy and funds were big sellers of 15-20,000 contracts as they
weren't limited by any limit moves.  Technicians are watching the September
contact as it moved below all key moving averages.

eCBOT market bounced back a little last night following the beans higher.
The December contract closed 2 cent higher after firming some toward the
very end of the trading session yesterday.  Weather remains the difference
maker in the grain markets and as we have seen the last 3 days, when the
forecast changes, it can be dramatic and painful if you aren't protected.
Remember, with the big money in the grain markets, this isn't the same
market it was 2,5,10 years ago, the moves will be that much bigger and that
much more dramatic.  The margin department is also to blame for this break
as many traders are being forced to liquidate because of these big moves and
not enough money.  This isn't something that can be measured, but it is
happening.  Some traders today will be looking for a bounce but there will
be traders lined up to sell any attempt to rally the corn market.  Leading
analysts will start making estimates on yield potentials as many feel the
crop is made and it is only a matter of how big the yields are going to be.
For the time being, the demand market is going to struggle because of
overwhelming supply, so traders will start to talk about 08 acres with beans
competing for acres.  Look for the market to open higher but struggle and
with beans the leader now, watch beans for direction.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCU7                324^4    2^0                   327^2    322^6

ZCZ7                 338^6    2^0                   341^4    337^4

ZCH8                353^0    1^6                   356^0    351^4

ZCK8                365^0    3^2                   365^6    364^0

Early Opening Calls: 2-4 higher

Top News

-- 29.69 mln mt of grain output expected for 2007, down around 10% from the
33.05 mln mt forecast earlier by Ukraine based ag analysts.  Wheat
production cut to 13.3 mln mt from prior forecast of 15.3 last month

-- Increased grain and cereal demand results in EU government debate to drop
the "10% fallow" rule, that results in 10% of all European crop land set
aside to support prices - could result in 10-17 mil ton more production,
acc. to EU officials

-- 29.69 mln mt of grain output expected for 2007, down around 10% from the
33.05 mln mt forecast earlier by Ukraine based ag analysts.  Wheat
production cut to 13.3 mln mt from prior forecast of 15.3 last month

-- Global Insight:  World ethanol production to exceed 100 bil gallons/year
by the year 2030 - this amounts to 15% of total fuel demand

-- COFCO to finance 300k ton/year and 200k ton/year ethanol facilities in
China that will use sweet potatoes as the primary feedstock, acc. to news
reports

-- Dalian Corn futures closed mixed across various months.

-- eCBOT Vol: 213,036; Pit Vol.: 73,554; Open Interest change: +13,053

-- Weather: Above Normal Temps. Below Normal Precip. The Corn Belt will see
scattered showers and thunderstorms today and Thursday.

-- Outside markets. Energy crude 22c higher, products higher also; Gold &
Silver: both higher; US $ higher vs. Euro, vs. Yen slightly lower

Cash Markets

-- CIF Corn:  July +43 to +46, Aug. +44 to +46, Sept. +45 to +46, Oct. +37
to +40,  Nov. +38 to +42, Dec. +42 to +46

TREND:

The corn spreads are paying close to 5 cents a month Dec to Jly. Time to
roll short hedges forward if you have not done so yet.

Carrying charge spreads are widening and may continue to do so for a while.
But this early in the season to lock in carrying charges going forward into
08 on a crop that is not yet even mature is not a super risky situation
particularly considering how much you are getting paid.

If we have another hard down day tomorrow would not be surprised to see the
markets bounce back.



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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