Linn Group Morning Corn Comment

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

The corn market was lower on Monday as we are in the middle of harvest
season and the market is filling the pressure.  As one trader said, the
bottom line is that harvest is moving along very well, ahead of schedule,
there is a lot of corn being harvested, and the yields continue to be higher
than earlier estimates.  The corn market found early support from the wheat
market, but it eventually sold off as the pressure from harvest just became
too much.  Overall, Monday was a pretty quiet day as volume was
light/moderate and funds were net sellers of 2,000+ contracts by the end of
the session.  Option traders were back in the corn market again on Monday,
buying puts and selling calls, another bearish sign for the corn market.
Argentina, the 2nd largest corn producer, said its farmers moved ahead with
planting as the soil moisture has improved over the last week or so.  Corn
seedings is a little behind, but not so much that it is a concern.
Persistent demand from corn from domestic usage and exports should continue
to support corn from breaking very hard, but it will still be difficult to
rally the corn market with the huge US crop hanging over its head.

eCBOT market was lower overnight as it seemed the corn market was hit with
some bearish information overnight.  1st was the USDA crop progress showing
corn 31% harvested which is ahead of schedule and we continue to hear about
better than expected yields.  The 2nd piece of news was VeraSun said it
would be suspending the building of a 110 mil gallon ethanol plant in
Indiana.  We have been hearing about the decline in ethanol margins hurting
these companies, but this is the first tangible proof that this is true and
this will hurt corn domestic demand.  Many traders have already built in a
decline in domestic demand, but this news will be viewed as bearish.  3rd,
FC Stone raised their crop production estimate again on Monday after the
close pushing their corn production to 13.44 bil bu vs. prior estimate of
13.044.  Just like the ethanol news, this isn't unexpected, but it is still
the 1st time you are seeing this news in writing.  The bottom line with corn
is that we are in the middle of a huge harvest and yields continue to
impress and come in better than estimates.  The demand for corn remains very
strong and this will help support corn, but most traders will tell you they
expect corn to go lower in the middle of big harvest pressure.  Funds will
be the wild card as they have been quiet the last 2 days.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ7                 362^0    -6^6                  368^6    360^4

ZCH8                377^6    -7^6                  385^2    377^4

ZCK8                388^4    -6^4                  394^4    387^4

ZCN8                398^0    -6^0                  403^4    396^0

Early Opening Calls: 7 to 9c lower

Top News

**USDA reports private sale of 140,208 mt of US Corn sold to Japan for 07/08

-- Traders report S Korea feed manufacturer bought 92,000 mt of US corn in
overnight trade.

-- FC Stone estimates 2007 US Corn production at 13.445 Bln bu in latest
report vs. prior report of 13.062 Bln on yield of 157.4 bpa, sees US Soybean
crop at 2.722 Bln bu in latest report vs. 2.682 Bln bu. on avg yield of 43
bpa.

-- Farmer's trade association executive in Nebraska estimates the state
could produce 1 bil gallons of ethanol yearly, with current consumption at
816 million, could mean the state would be self-sufficient if cars could be
converted to 100% ethanol blend

-- S African white corn exports fell to 7,241 mt down from last week's 7,934
mt

-- S African yellow corn exports fell to 1,358 mt down from last week's
2,835 mt, acc. to gov't stats office

-- Stats Canada numbers on Thursday eagerly awaited by wheat traders;
average total production estimates are between 19.6 and 20.5 mil tons

-- Senate Ag Committee will work out markup details on the upcoming US Farm
Bill on Wednesday, acc. to gov sources

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

Monday's Export Inspections Recap

Wheat Export Inspections:  39.384 mln mt; expected 37.5 mln mt, previous =
41.387

Corn Export Inspections:  42.994 mln mt; expected 40.5 mln mt, previous =
45.354

Soybeans Export Inspections:  11.152 mln mt; expected 18.0 mln mt, previous
= 16.722

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

-- USDA Corn crop conditions were unchanged from the prior week, harvest
rose 9% to 31% in latest week.

-- Dalian Corn futures

-- eCBOT Vol: 99,424; Pit Vol.: 27,301; Open Interest change: +2,732

-- Weather: Above Normal Temps. Normal to Above Precip. Scattered showers
and thunderstorms will move west to east across the Corn Belt today

-- Outside markets. Energy lower; Gold & Silver: sharply lower; US $ sharply
higher vs. Euro, but flat vs. Yen.

Cash Markets

--CIF Corn up 1 to 2. Sept. +52 to +57, Oct. +56 to +58, Nov. +60 to +64,
Dec. +59 to +62, Jan. +48 to +50 J/F/M +48 to +50

TREND:

The chart below shows the reversals in corn with the gap support below. The
trade may have developed some additional down side momentum today taking out
the Friday lows.  Concern that wheat might support corn has taken a turn
with both markets pretty much uncoupled



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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