Linn Group Morning Corn Comment

CHICAGO - Aug 8/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market rallied higher on the back of the bean market and the lack
of rain in central and southern areas of the corn belt and the hot weather
starting to show some damage.  Firming corn values across the world and feed
wheat issues also contributed to the rally.  Many traders didn’t feel we
would see much price action before the release of the USDA report on Friday
morning, but outside conditions helped push prices higher.  The world is
dependent on a huge US corn crop and any threat to this crop will cause
price jumps because there is very little room for error.  Monday, the corn
market sold off on the big rains over the weekend across the northern corn
belt and those areas have received rains all week, but the central and
especially the southern belt have received not rain and are having mid 90’s
to 100 degree temps this week.  Some traders also said we could be seeing
some short covering in front of the USDA report as many funds and traders
have been short the corn market are were not worried about a rally.  Volume
was moderate/heavy and funds came after the corn buying almost 10,000
contracts by the end of the trading session.  The average bu. per acre yield
estimated by analysts ranges from 148.5 to 154.4 vs. the USDA July estimate
of 150.3 bu per acre.  Demand for world corn remains strong as many European
feed needs can’t be met by the US because of anti-GMO laws, so they are
scouring the rest of the world for their feed needs, thus pushing up corn
prices.

eCBOT market was a little higher overnight on no change in the weather
forecast basically keeping the central/southern corn belt hot/dry in the
coming days.  The December contract closed 1 ½ higher on its highs, but in a
tight trading range.  Beans moving higher and the hot/dry weather seems to
be the main culprit for pushing corn prices higher.  Rains are being called
“million dollar rains” for the northern corn and bean belt that was so dry a
week ago and the market keeps rallying in the face of the rain.  Talking to
traders this morning, many have said they are reducing short positions into
the USDA number on Friday morning.  The corn market is trading off of
weather and as we all know, the weather can change in a matter of minutes,
thus making trading off of weather very difficult and a crap shoot.  Traders
are positioning themselves for the USDA report and keeping an eye on the
weather as the week unfolds.  The corn market should open in-line with the
close from overnight, but weather and bean prices could dictate which way
corn moves.  The wheat/corn spread is also playing its part as we saw some
liquidation yesterday, helping push corn prices higher.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCU7                336^6    1^4                   337^0    333^2

ZCZ7                 353^4    1^4                   353^4    349^6

ZCH8                368^4    1^0                   368^4    365^2

ZCK8                376^6    -0^4                  377^4    375^4

Early Opening Calls: 1 to 2c higher

Top News

-- Friday USDA supply/demand report, analyst expect corn production at 12.9
bln bu, on yield of 151.2 bu/ac

-- 2007 Chinese corn production left at 149 mln mt by CNGOIC.  The group
also left the wheat production estimate at 107 mln mt.

-- S Africa imported a net 22,403 mt yellow corn for the week ending Aug 3,
acc. to grain stats office

-- S Africa exported a net 3,680 mt white corn for the week ending Aug 3,
acc. to grain stats office

-- National Hurricane Center will release an update seasonal storm forecast
Thursday morning. After Colorado State revised downward number of Atlantic
hurricanes by 1, a NY-based energy analyst wouldn't be surprised if NHC
lowers their estimate also

-- Funds on the day closed net buyers of an estimated 8,000 corn contracts
as Wednesday marked the first trading session of the Goldman Roll.

-- eCBOT Vol: 143,613; Pit Vol.: 65,575; Open Interest change: -14,703

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

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

Cash Markets

--CIF Corn steady off 1.  Aug. +57 to +58, Sept. +59 to +62, Oct. +46 to
+50,Nov. +48 to +50, Dec. +50 to ??, Jan. +38 to +42

TREND:

The wheat market suffered again on lack of Egypt purchases of US wheat. Lot
of soft wheat guys looking for the trade and was disappointed in Black Sea
supplies available at $4 to $5 less than expected. Ocean freight defeated
the trade but does not matter---lack of trade was what kept wheat weak all
day. The fact that soft white wheat was offered at $10 discount to soft red
was also an eye opener. Soft red basis has weakened now in reaction to lack
of trade over the last two tenders? The U/Z wheat spread traded fairly
actively today at 20 cents. Full carry is 23.4 cents.

Corn got a boost from corn/wheat spreading early in the day and was
responsible in driving corn prices above last week’s highs. This triggered
buy stops in corn that carried the strength above what was expected. Goldman
roll has started with the U/Z corn spreads trading actively at 17 cents vs.
full carry at around 18.5 cents. CZ appears to have a target of trading up
to 3.55 to 3.60 to test the gap there. Still not sure the market can extend
the gains that well?



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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