Linn Group Morning Corn Comment

CHICAGO - Oct 10/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market closed higher on Tuesday on the back of the rally in the
bean market.  The December contract closed 2 ½ higher, but well off its
highs.  As one trader said after the close, there was nothing new in the
corn market, it was all based on the rally in beans.  Talk among traders
yesterday was the USDA report was going to lower harvested bean acres and
raise harvested corn acres and that was the main driver of the rally in the
bean market.  We kept hearing rumors from different sources that the USDA
was going to reduce bean acres by 2 mil and raise corn acres by 1 mil.
Traders also said the corn and beans were over sold last week and due a
bounce.  With the release of the USDA report on Friday morning, we are
starting to see traders squaring positions to protect themselves from a
surprise report.  The average analyst estimate for Friday’s report is 13.466
billion bushels above the 13.08 bil bu estimated in September and ending
stocks of 1.965 billion bushels, above the USDA September estimate of 1.675
bil bu.  Harvest weather remains very good and exports remain strong.
Taiwan announced they would allow feed corn imports from China, but most
traders said the announcement is moot because there just isn’t that much for
China to export.  Volume was light/moderate and funds were net buyers of
5,000 by the end of the day.

eCBOT market was higher overnight as we saw the bean complex move higher,
continuing the rally that started yesterday.  The December corn closed 3 ½
higher with the November beans closing 17 higher overnight.  USDA released
the weekly crop progress report last night and it showed corn 42% harvested
vs. 31% last week and 30% 5yr average.  These numbers aren’t a big surprise
and should have little to know affect on today’s market action.  As we saw
yesterday, even with the strong bean market, there were sellers in the corn
when it got 8 cents higher.  Very little reason to rally corn and there will
probably need to be a big surprise in the USDA report on Friday to change
most traders opinions on the corn market.  The US is in the process of
harvesting the largest corn crop in history and no matter how strong the
exports are going to be this year, there is still a lot of corn available.
The corn market should be higher this morning on the back of the soy
complex, but we still feel the corn market will have trouble rallying very
much.  I don’t feel anything has changed in the corn market and traders will
be there to sell rally’s and users will be there to support the breaks.
Traders will begin to square positions in front of the USDA report released
before the opening on Friday.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ7                 346^0    3^4                   347^0    343^2

ZCH8                362^4    3^0                   363^0    359^4

ZCK8                372^4    3^2                   372^6    370^0

ZCN8                382^4    4^0                   382^4    378^4

Early Opening Calls: 2-4 higher

Top News

-- Friday USDA releases latest monthly crop supply/demand & world ag
production figures. Analysts see corn production at 13.46 mln bu and a yield
of 157.7 bu/ac.  Carryout is estimated to be 1.959 bln bu.

-- Tender for 330,000 mt of Corn were passed by S Korea on Wednesday

-- The latest corn production estimates in the EU bloc see the total crop
falling 15-17% on inclement weather - 45-46 mil tons of corn expected, acc.
to trade groups

-- DDQ launches 100% capital protected ag commodity fund, acc. to a company
statement - the organization is already running a protected general
commodity fund

-- USDA corn latest weekly progress shows harvest pace was 42%, up from 31%
seen last week & ahead of 5 yr avg of 30% complete. Good to excellent
conditions remained unchanged from the prior week at 63%.

-- USDA Corn Export Inspections: 42.187 mln bu for weekending Oct 4

-- Dalian Corn futures were lower in overnight trade, May down 4 Yuan/mt

-- eCBOT Vol: 100,431; Pit Vol.: 20,398; Open Interest change: -207

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

-- Outside markets: Energy complex: crude & active month products higher ;
Gold & Silver both higher; US $ lower vs. Euro, up against the Yen

Cash Markets

--CIF Corn steady up 2 . Oct. +56 to +??, LH Oct. +59 to +??, Nov. +63 to
+??, Dec. +63 to +??, Jan. +50 to +51 J/F/M +50 to +51

TREND:

Euro corn and wheat market rebounded overnight gaining back most of what was
lost yesterday and may have been instrumental in the early rally in US
futures.  Night session also saw very big spread trade in meal and oil
covering almost all of the meal open interest and about half of the oil open
interest. Spreads are at full carry but it is unusual to see this all
cleared up in the night session and was assumed to point to potential
business and a concern about firming basis affecting spread trade?  This
added to the bounce back in flat price.

The wheat market is starting to act like we had expected---gave a fairly
good chance to sell the small rally today. Spreads also bounced slightly for
a chance to get on board---this continues to be the short leg for grains.

The corn market bounced off the oversold conditions. The rally was slightly
more aggressive than I expected?  Sell an 11 cent rally back. The carries
should continue to widen a bit.



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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