Linn Group Morning Corn Comment

CHICAGO - Oct 12/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market sold off on Thursday in front of the USDA report released
this morning which is expected to show piles and piles of corn all across
the Midwest.  Harvest remains very active and yields continue to look
impressive.  Traders view this report as very big because of all the
uncertainty about the size of the US corn crop.  Many analysts have been
trying to make a prediction on the size of the corn crop and today, we will
get a pretty good estimate because we are that far along in the harvest.
The weather has been excellent in most of the Midwest, but some of the
western areas, specifically Iowa, are behind schedule, but it isn't a great
concern.  Volume was light/moderate and funds sold 3,000.

eCBOT market was lower overnight in front of the USDA report as much of the
market suspected a big corn number and looked for the corn market to go
lower.  Well, the USDA actually lowered their average yield in the October
report to 154.7 from the Sept. estimate of 155.8.  Corn production was
13.318 vs. 13.308 in Sept and 13.459 ave estimate.  Harvested acres was
taken up 500,000, whisper on the floor was a 2.0 mil increase.  At first
glance, the numbers look bullish with much of the market playing a much
higher yield number, but when you look closer, corn stocks are still going
to be over 2 mil which isn't bullish.  After looking at the ending stocks
numbers, they feel the reduction in ethanol usage is understated, thus
increasing stocks even more in the next report.  The next big question is
whether or not exports can make up for the reduction in ethanol.  Well,
weekly export sales this morning was 2.319 mil vs. the estimate of 700,000
to 1.0 mil.  This is a huge number and will add to the bulls rallying cry
for a higher corn market today.  Corn is going to open probably at least 10
higher this morning and we will see if it can hold the gains or if it finds
selling.  I would say that the market is caught off guard with today's
report as the market was trading a higher yield and production number and
now you have traders that were short into this report and are going to have
to buy corn today to cover shorts.  Wheat stocks are at historic lows, but
Australian production was up so that should be neutral.  The report for
beans was bullish as lowered some big soybean states production estimates.
Corn and beans should lead the grain market higher today, but I see the key
today is whether or not corn finds sellers 10-15 higher.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ7                 341^2    -2^4                  343^2    340^6

ZCH8                358^0    -2^6                  360^0    357^4

ZCK8                368^0    -2^6                  370^0    368^0

ZCN8                378^0    -2^0                  380^0    377^6

Early Opening Calls: 7 to 10c higher

Top News

**US Oct Corn 07/08 Crop Prod: 13.318 bln bu.; est. 13.46 bln bu.; Sept Rpt
13.308

**US Oct Corn 07/08 Yield: 154.7 bu/ac; est. 157.8 bu/ac; Sept Rpt 155.8
bu/ac

**US Oct Corn 07/08 Carryout:  1.997 bln bu. ; est. 1.97; Sept Rpt 1.675

**World 07/08 Corn Carryout: 110.3 mmt; Sept Rpt 105.4

**Oct Argentina 07/08 Corn Output:  22.5 mmt; Sept Rpt 22.5

**Oct S Africa 07/08 Corn Output:  10.5 mmt; Sept Rpt 10.5

**Oct China 07/08 Corn Output: 143.0 mmt; Sept Rpt 147.0

**USDA Corn 07/08 Export Sales Net: 2.319 mln mt; 08/09 Net: none ; expected
750,000-1.1 mln

-- 55,000 mt of US Corn bought by S Korea for Feb delivery

-- Traders second guessing USDA yield estimates as major corn producing
states yields were lowered

-- Turkey has purchased 25k tons of US-origin corn at a price of $172.50 per
ton, acc. to traders

-- EU Thursday sold 95,800 mt of Hungarian corn into internal market, acc.
to an official

-- Texas legislature removes 20 cent/gal biofuel incentive to balance the
state budget - could create profitability issues for new ethanol plants

-- EU authorities have been investigating collusive activities between
several freight forwarding companies operating in the bloc, acc. to gov
sources

-- The sub prime credit crunch may lead many investors to pursue assets with
a commodity markets backing, possibly through a security known as a CCO's,
or CDO's

-- NOAA sees La Nina weather phenomenon gaining strength, should last until
2008 at the earliest - more rain for PNW USA, less for SW USA

-- Dalian Corn futures lower in overnight trade, May off 15 Yuan/mt

-- eCBOT Vol: 94,832; Pit Vol.: 30,018; Open Interest change: +1,533

-- Weather: Above Normal Temps. Normal to Above Precip.

-- Outside markets: Energy complex: front month crude higher, rest lower;
products lower ; Gold & Silver both lower; US $ higher on Friday vs. Euro &
Yen.

Cash Markets

--CIF Corn off 1 to 2 . Oct. +57 to +60, Nov. +63 to +65, Dec. +64 to +66,
Jan. +51 to +54 J/F/M +51 to +54

TREND:

It is obvious the trade wanted to cover short wheat positions in front of a
report where ending stocks is expected to be lowered sharply. We expect most
of this cut to come in hard wheat.

Corn just does not seem too concerned about price structure. There remains
pricing on weakness and farmer selling on rallies. The trade expects an
increase in corn yields and a major increase in ending stocks.



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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