Linn Group Morning Corn Comment

CHICAGO - Aug 13/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market opened lower on Friday after the big sell off in outside
markets, but found buying during the session to close slightly higher.  The
December contract closed 1 ¾ higher almost 10 cents off the lows.  Many of
the outside markets were sold hard early in the day and the grains were part
of that decline, but recovered after funds turned from sellers to buyers and
commercial accounts decided there was some value in corn and bot the market.
Open interest in corn has declined significantly last week as many traders
are saying that funds are liquidating some of their commodity positions just
looking to reduce their exposure to risky markets.  On top of the general
sell off in commodity markets, the USDA report was bearish corn as the USDA
estimated the yield for corn at 152.8, above the average guess by analysts.
On the other side, the USDA raised the demand for corn which offsets the
bigger yield estimate.  These 2 changes really offset each other, thus
making corn vulnerable to any negative weather change.  Volume was pretty
heavy and funds ended up net buyers of 3,000 contracts after being good
sellers earlier in the session.

eCBOT market was higher overnight on the back of hot/dry weather in the
forecast this week for the central/southern corn belt and the anticipation
of a lower crop condition report this afternoon after the close.  The rain
is still forecast to miss much of the southern corn belt again this week and
those areas are nearing harvest, so the market will start to get some idea
of actual yields.  Traders this morning seem to think we will see another
decline this week of 1-3% good/excellent.  This decline was part of the
reason some traders didn’t look at USDA report as being as negative because
it didn’t take into account the first 10 days of August.  The market will
open stronger today and look for direction after the opening.  We still feel
that corn is a follower in the grain complex, following beans and wheat.  No
really new news over the weekend and corn will find support from users on
any price break.  Starting to hear about some early corn yields in the south
being below average estimates, but it is still very early and no way can you
make generalizations off of small surveys.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCU7                337^2    4^2                   340^4    335^6

ZCZ7                 354^2    3^6                   357^6    352^6

ZCH8                371^4    5^6                   373^0    367^2

ZCK8                378^4    3^2                   381^4    377^0

Early Opening Calls: 2-4 higher

Top News

-- Tender to purchase 56,000 tons of US corn, by a consortium of Israeli
private buyers, European traders said.

-- Nonghyup Feed Inc., of South Korea purchased 45,000 tons of Chinese corn
at $223.90/ton late last week, traders said.

-- Analyst expect small decline in corn & soybean crop conditions.

-- Funds bought 2,500 Corn contract in Friday's trade.-- Dalian Corn futures
settled 20 Yuan higher in Monday's overnight trade.

-- eCBOT Vol: 151,430; Pit Vol.: 71,047; Open Interest change: -14,766

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

-- Outside markets: Energy complex: crude 90c higher, products higher ; Gold
40c lower & Silver 3c lower; US $ higher vs. Euro, unch vs. Yen.

Cash Markets

-- CIF Corn steady firm.  Aug. +52 to +56, Sept. +56 to +60, Oct. +48 to
+50,Nov. +49 to +52, Dec. +52 to +55, Jan. +37 to +40

TREND:

Trade will read the price action today as not bearish---some pushing for
even bullish.

Look for the reaction early next week to still carry a lot of weather
momentum. Not sure I want to get too shook up on corn ---could rally a
little more but into resistance areas now that will have a hard time
extending unless there is an outside influence that overcomes early harvest
in the deep south. This harvest will move north in late Aug. There will also
be a “pre-harvest” movement that offers some pressure on the upside movement
in corn.

Wheat is the market leader and I see no sign that this is done. Watch for a
blow off trade leaving closes or reversing off early strength to give a
solid clue. When it is over it will be swift. Being long deep out of the
money puts in deferred wheat is one way to trade this. Farmer pricing in Jly
08 has not much risk---except that world wheat is legitimately tight and
will depend on crops in Arg and Aust to carry the user staring in JFM 08.
Watch the weather developments there. Already seeing pretty dry conditions
in Arg. Will watch the situation in Aust but it has improved after a shaky
start earlier.

Maybe not a lot of down side potential in these markets? Sure with wheat at
$7.00? Who am I kidding?



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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