Linn Group Morning Corn Comment

CHICAGO - Oct 15/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was higher on Friday after the release of the USDA October
crop production report which was lower than expected.  The corn market was
also supported by weekly export sales which were over 2 million and twice as
big as last weeks number.  The carryout number for corn is still big, but
the market tended to focus on the production number and a lot of traders
were caught on the wrong side of the corn market.  The December corn market
gapped higher, almost 14 cents before settling back up 9 or so.  Corn has
been the short leg against beans and wheat, so traders said there was a lot
of traders covering their short leg of the spread as well.  As one trader
said after Friday's action, the September lows in December futures are
probably good, but the upside is still limited because the ending stocks is
high enough.  The USDA reduced the growth in fuel ethanol industry by 100
mil bushels for the 2nd month in a row and some traders think even this
reduction was too conservative.  Even with the USDA reduction in ethanol,
almost 25% of the US corn crop will go toward ethanol production this year.
Technicians point to the December contract which traded above the 50-day
moving average at $3.52.  Volume was light/moderate and funds bot +5,000
contracts.  Corn was also supported by option trade as we had a firm buy
4,000 Dec $4.00 calls on Friday.

eCBOT market was higher overnight as the market continued to see buying that
started on Friday after the release of the USDA report.  With the USDA
report out of the way, traders will now concentrate their attention on So.
American plantings and weather, and planted acres next spring.  The
consensus seems to be that there is going to plenty of corn this fall and
that will keep a lid on old-crop prices.  Private exporters reported 242,000
tones of US corn to So. Korea over the weekend.  Talking to traders this
morning, it seems that many traders are will begin to focus on planted acres
and demand as maybe now corn will have to battle for corn acres in 2008.
There was big premium selling of straddles on Friday as many traders feel
the corn market is going to trade in a range for the near future and are
trying to take advantage, but as one option traded reminded me, they have
been trying to do this for the last year or so and have been getting burned.
Argentine corn planting is being delayed by rains, but it is well ahead of
last year and 5yr average and the rain will help the corn already in the
ground.  The corn market should open 3-5 higher this morning and it will be
interesting to see where the market goes from here.  Corn will probably look
for direction from the other grain markets and traders will be interested to
see if we have any further spread liquidation of the long wheat/beans and
short corn.  Outside markets will also help support corn as we have crude
and gold up this morning and a weaker dollar.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ7                 356^2    5^2                   357^0    350^0

ZCH8                372^4    4^6                   373^4    367^0

ZCK8                383^2    5^0                   383^4    377^6

ZCN8                392^0    4^2                   393^0    387^0

Early Opening Calls: 3-5 higher

Top News

**USDA reports private sale of 07/08 US Corn totaling 242,000 mt sold to S
Korea

-- 100,000 mt of feed barley sought in Oct 23 tender by Morocco, acc. to
state grain buyer

-- For the sake of progress, farmers union in France urges quick decision on
proposed laws governing GMO seeds & crops.

-- The Commitment of Traders report with Options as of October 9 shows
Funds: Corn Long 143,701 off 35,945

-- Chinese stats dept reports pork prices fell 0.8% in the Oct 7-12 period,
the second weekly fall.  Analysts & economists expect recent monthly Chinese
inflation to have stabilized in the near term

-- Dalian Corn futures active May contract rose 12 Yuan/mt in overnight
trade

-- eCBOT Corn Vol: 133,412; Pit Vol.: 38,992; Open Interest change: +12,717

-- Weather: Above Normal Temps. Normal to Above Precip. The Corn Belt will
see a chance of scattered showers and thunderstorms almost every day this
week.

-- Outside markets. Energy: crude higher, products higher ; Gold $9.00
higher & Silver: 19c higher; US $ lower vs. Euro, slightly higher vs. Yen.

Cash Markets

--CIF Corn steady up 2. Oct. +59 to +62, Nov. +63 to +65, Dec. +63 to +66,
Jan. +51 to +54 J/F/M +51 to +54

TREND:

The corn market gapped away from the lower end of the old trading range.
Still appears the abnormal trade was the breakout above this range earlier
this month. Still feels as if we can fade a trade at 3.40 and 3.60 for the
time being. Spreads have widened as far as I expect them to with firming
basis levels around. Roll short hedges forward now.

Bean spreads widened today on the fear the new crop once again hast to fight
corn to maintain acres. This may give the bean hedger a chance to roll
hedges forward as well. These have not gone quite to the carries of corn but
there is a reason. Take note.

Wheat is a dead duck if we take out this month's lows. I have not been very
successful in selling weakness here and that is why we have taken on the
bear spreads as a trade. Stay involved with negative option trades or bear
spread trades on days when the whet market finds a reason to rally. Seems
capable of that from time to time.



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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