Linn Group Morning Corn Comment

CHICAGO - Aug 2/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market sold off on Wednesday on the back of the weather forecast
for better rains across the driest areas of the western corn belt.  Some of
these areas have late developing corn and these rains may prove very
beneficial in helping the corn crop.  The hot weather over the next 7-10
days remains a concern, but the greater chance of rain in the western belt
pressured the corn and beans lower.  A prolonged dry spell in some of the
major corn growing areas could hurt output, but the driest areas getting
rain will continue to pressure futures prices.  Traders also pointed to the
lack of buying of the corn market as helping futures prices go lower.  As we
discussed yesterday, it was the beginning of the month/end of July and some
traders were betting that new fund money would be coming into the corn
market yesterday and when that didn't happen, they covered their longs
helping with the sell off.  We have seen other outside commodity markets
sell off and some traders are speculating that maybe some of the hedge funds
are taking some risk off the table by not putting new money into commodity
markets this month.  Volume was light to moderate and funds were net sellers
of over 5,000 contracts by the end of the day.

eCBOT market was higher overnight after FC Stone released their production
estimate lower than the USDA estimate in July.  FC Stone estimated a corn
yield of 148 bu vs. USDA July estimate of 150.3 and the talk among traders
of a 155-160 bu per acre.  This lower estimate was not unanticipated by
anybody that has been reading the daily FC Stone market letter, but it is
still a low number and helped push corn futures higher.  But, as more than
one trader said this morning, if the market felt the FC Stone number was
good, corn futures would be up limit 2-3 days in a row.  When looking at
their numbers state by state, they seem to be a lot worse in the MN, OH, MI,
IN than other estimates.  Another leading grain analysts, Informa, will
release their estimate today app. after the opening and traders will be
looking how it compares to the FC Stone number.  The Linn Group will be
releasing their estimates after the close on Friday.  Export sales this
morning will also lend support to corn as export sales were once again much
above the 700,000 to 1.0 mil estimate.  Weekly export sales were almost 1.8
mil and the wheat export sales were also very strong.  The market will open
strong on the back of the FC Stone estimate and the strong export sales and
we will see where the market goes from there.  Different traders/analysts we
talked to this morning think the FC Stone number is too low and the market
won't react to it like it would if the USDA releases the same number next
Friday.  Hold on, today could be a volatile day if the funds get involved
and depending on the Informa estimate.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCU7                325^0    6^0                   326^4    323^6

ZCZ7                 341^6    5^6                   343^2    340^0

ZCH8                357^0    5^6                   358^0    353^4

ZCK8                367^0    5^2                   367^4    362^2

Early Opening Calls: 6 to 8 higher

Top News

**USDA Corn 06/07 Export Sales Net: 806,000 mt; 07/08 Export Sales Net:
970,200 mt; expected 700-900,000 mln

-- Minneapolis bridge collapse closes Mississippi River near site.

-- Chinese central gov't urges local community governments to stockpile pork
ahead of holiday season starting in September & running through Oct.  The
document issued to local gov't did not specify how local gov't should
procure pork supplies

-- FCStone released late Thursday afternoon corn & soybean production
estimates.  Group sees this year's national corn yields at 148 bu/ac., and
total production at 12.64 bln bu.  The estimated overall soybean production
at 2.681 bln bu, at an avg yield of 42.4 bu/ac.  In Illinois production of
corn was estimated at 2.28 bln bu & yield of 176 bu/ac, beans 407 mln bu
with yield of 49 bu/ac.  Iowa corn harvest 2.33 bln bu with state yield of
167 bu/ac., while soybeans estimated at 447 mln bu and yield of 51 bu/ac.
Nebraska corn harvest at 1.418 bln bu on yields of 163 bu/ac., while
Minnesota corn harvest pegged at 1.048 bln bu and yields of 137 bu/ac.

-- Dalian Corn futures unch to 2 Yuan higher in active Jan & May contracts.

-- eCBOT Vol: 113,760; Pit Vol.: 43,395; Open Interest change: -10,063

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

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

Cash Markets

--CIF Corn firmer up 1 to 3.  Aug. +46 to +49, LH Aug. +48 to +50, Sept. +50
to +51, Oct. +40 to +41,Nov. +42 to +43, Dec. +46 to +47, Jan. +34 to +37

TREND:

Unable to hold the wheat down today. Too much pricing and users see every
small break as an opportunity. This market still has the potential to really
rock with the highs still not set. The spreads in Chi are showing the
results of increased sales and the lack of a willing bear spreader here. I
still see a huge increase in acres this fall making the WN8 or KWN8 the
safest short in wheat. Find a way to do bearish things around these
contracts. Save some room because the potential of a big rally in the spot
markets could tighten the spreads and tug that flat price higher as
well---just ensuring the acreage increase will be bigger than I am currently
forecasting. The spreads are shown below.

Corn demand in the domestic market has taken a hit. Ethanol margins remain
solid but cattle feeding margins have deteriorated very seriously over the
last 45 days. Spread charts are shown below

If the trade believes the FCStone est tonight, have to think corn would be 4
to 6 higher---but based on conversations so far, that does not appear to be
the case.



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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