Linn Group Morning Corn Comment

CHICAGO - Oct 4/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was mostly lower on Wednesday as the market seems to
building in pressure on a big corn crop and bigger carryout when the USDA
releases its next crop report next week.  Lacking any bullish news, the corn
market is going to have a hard time moving higher until the USDA report next
week gives the market a more accurate picture of the size of the US corn
crop and carryout numbers.  The corn market continues to find support on
breaks because of the demand for corn remains strong.  This may seem like a
broken record, but there is no new news for corn right now.  Harvest was put
on hold for a day or two as enough rain fell in the Midwest to stop harvest,
but as we said yesterday, corn harvest is way ahead of schedule.  Volume was
moderate to heavy and funds were net sellers of 4,000+ contracts by the end
of the day.  Traders pointed to the deferred 2009 contracts closing firm
because of big option trade as one end user was buying upside call spreads
and selling out of the money puts.  The wheat/corn spread remains a big
trader for large traders and keeps gaining momentum.  This spread is really
just a long wheat position because any break in corn should be limited.

eCBOT a little higher overnight with little to no new news coming out but
wheat continued to push higher with the December closing 15 cents higher and
there is continued talk of users buying breaks.  Volume was pretty light
overnight at only 7000 contracts for all months.  USDA released weekly
export sales this morning at 1.105 mil which at the top end of the estimated
900,000 to 1.1 mil.  This number is still a strong number and could be
viewed favorably because some traders we talked to this morning were
actually expecting sales to be a little weaker this week.  Everybody expects
export sales to remain strong so the weekly export number isn't looked at as
much as it used to be in years past.  The market seems to brush off these
numbers unless it is vastly different from expectations.  Nothing has really
changed in the corn market and we expect this market to continue to trade in
a range with traders stepping out to sell any rallies and commercials/users
buying breaks.  Unless the funds get involved, we feel nobody is going to
try and sell a down market or buy an up market.  Wheat is still the wild
card as it had big weekly export sales this morning, drought in Australia
keeps reducing the crop and Stats Canada should support the wheat market.
The corn could see some spill over buying from the wheat market or short
covering from traders that have tried to find a top in the wheat/corn
spread.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ7                 348^6    4^2                   349^6    345^4

ZCH8                365^0    4^0                   366^2    362^0

ZCK8                373^2    1^6                   376^4    371^4

ZCN8                385^4    4^6                   386^0    380^6

Early Opening Calls: 2-4 higher

Top News

**USDA Corn 07/08 Export Sales Net: 1.150 mln mt; 08/09 Net: none ; expected
900,000-1.1 mln

**Stats Canada Sept Production Estimates, Barley:  +23.5% to 11.82 mil tons,
expected = 11.6 mil

-- South Korean private livestock concern purchased 202k tons of corn from
ADM/Mitsubishi, acc. to traders. South Korean purchase was primarily from
the United States, at an average purchase price of about $268/ton to
$269/ton, acc. to industry sources

-- US Grain council sees Chinese corn crop at 139 mln mt, down from the
145.5 mln mt last year

-- Senate Finance Committee Chairman Max Baucus unveiled a new farm bill
that would scale back income tax credits available to those who blend
ethanol with gasoline from $0.51 to $0.46.

-- Thursday Informa will release updated corn & soybean production numbers.

-- US Farm Bill details unlikely to be worked out before Columbus Day
holiday, acc. to gov sources

-- USDA-sponsored Renewable Energy Conference WIREC to be held in DC on
March 4-6 of 2008

-- German legislators said to be considering lifting taxes levied against
the country's biodiesel industry, following reports of plant slow-downs or
outright closures

-- French producers and trade unions strongly encourage the country's
legislature to allow GMO crops in order to stay competitive with the world
as debate on the subject continues

-- Grain said to cost $3/bu more to ship from South American destinations to
Asia than North American to Asia, acc. to contacts in the freight industry

-- European Union extends poultry ban to Canada after bird flu was detected
in a farm in Saskatchewan, acc. to gov sources

-- eCBOT Vol: 165,794; Pit Vol.: 41,316; Open Interest change: -10,748

-- Weather: Above Normal Temps. Normal to Above Precip. The Corn Belt looks
dry today into Saturday.

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

Cash Markets

--CIF Corn steady off 1. Oct. +57 to +58, LH Oct. +60 to +61, Nov. +62 to
+65, Dec. +61 to +64, Jan. +48 to +50 J/F/M +48 to +50

TREND:

Corn pricing continued active today. However, this continues to be the weak
leg in trade. Big bear spreading late in the day may have pressured the
front months more than would have been the case on flat price trade only. I
see scaled down support in corn as we churn into the lower side of the old
340-360 or 335-355 trading range. Demand should continue to surface here and
create new demand.

Wheat market is not going to make it easy. Unsure of what risks are involved
on the short side, most will not stay with a sales posture when the market
turns back up. I know that the demand side of the market has pricing to
do---Sales and exports by the US, Canada, and the Black Sea origins have
been very active and left the impression that demand has not diminished at
$9.00 plus wheat---$12.00 wheat in Europe. Have to divide the classes in the
US---there does not appear to be a lot of demand for US soft red wheat as
long as there is a lot of in store wheat in Egypt. Sales of soft red to the
African continent, the Med, and Mex are just not big enough to keep Chi
strong past the fund ownership? KC/Chi appears the safest way to play the
negative side of this wheat market. Even the bear spreads in Chi that looked
ready to widen yesterday bounced back today. There is not a bull trade here
in those spreads. Bear spreads are still the way to line up here in Chi.
Less certain in KC spreads



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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