Linn Group Morning Corn Comment

CHICAGO - Nov 5/07 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market followed the outside markets higher on Friday as gold made
fresh 28 year highs, crude oil was up over $2 and the US$ was weaker against
most major currencies.  The December contract closed 8 ¼ higher on Friday
but almost 4 cents off the highs as we saw late profit taking.  It was
basically the opposite of what we saw on Thursday and the grain markets
responded.  With little to no new news out, corn is moving with the outside
markets and investment funds.  Traders looked at the crop estimates by FC
Stone and Informa and decided even if the estimates weren’t bullish for
corn, both were below the September estimate and weren’t bearish.  Informa
released their estimate Friday morning at 13.139 bil bu and a yield of 153.3
bu per acre.  Traders also pointed to technical buying as December futures
traded about $3.80 for the first time since late September.  Volume was
light/moderate, but funds were buyers of 7,000 contracts.  On the weather
front, US harvest weather remains good and So. America continues to see good
crop growing weather for early in the season.  Some experienced traders are
looking at historical weakness in corn this time of year when exports should
slow down as most have priced their near-term needs through the first of the
year, but higher outside market could stop this from happening.

eCBOT market was lower overnight on light volume with the December sitting
back almost 4 cents or giving back half of the rally on Friday.  Traders
point to the outside markets as the reason for the break with crude oil
lower and a slightly stronger dollar.  The USDA announced that Egypt bot
120,000 tones of US corn for delivery in 2007/08 marketing year which began
on Sept. 1st.  So. Korea bot 90,000 tones of US corn over the weekend for
February delivery.  It is very interesting to see So. Korea into the US for
corn again over the weekend instead of China.  All the grain markets, but
especially corn, seem to get its price action from the outside markets and
investment funds, instead of weather and S&D estimates, but that isn’t
uncommon this time of the year.  Weekly exports were lower last week which
is to be expected with the higher cash prices, the end of the year, and
record ocean freight.  USDA releases its November production estimate on
Friday so we will start to see some position squaring in anticipation.
Also, traders expect to see Deutsche Bank in the corn market rolling their
long Dec07 contracts into the Dec08.  This will have a material affect on
prices, but it should be fleeting and just shows the power of the investment
funds on the grain markets.  We look for the corn market to open lower this
morning and look for direction from the outside markets and investment
funds.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCZ7                 373^2    -3^6                  376^6    372^2

ZCH8                391^4    -3^0                  393^4    389^2

ZCK8                402^0    -2^0                  403^0    399^2

ZCN8                410^0    -3^4                  413^0    409^0

Early Opening Calls: 3 to 4c lower

Top News

**USDA reports private sale of 120,000 mt of Corn sold to Egypt for 07/08
market year

-- Ukrainian legislators have officially pushed the start date of grain
exports back to Jan '08, instead of Nov '07

-- Informa on Friday estimated the corn yield at 153.3 bpa, production at
13.193 bil bu - this represents a production estimate decline of -2.37% from
last month

-- The Commitment of Traders report with Options as of October 30 shows
Funds: Corn Long 173,217 up 17,466

-- Dalian Corn futures +28 Yuan/mt to 1753 Yuan/mt basis the May contract on
1.129 mln contracts traded.

-- eCBOT Corn Vol: 156,666; Pit Vol.: 50,345; Open Interest change: +3,398

-- Weather: 6-10 Day Forecast: Normal to Below Temps. Normal to Below
Precip. The Corn Belt looks dry today and Tuesday.

-- Outside markets. Energy: crude off 1.50 to $94.37/bbl, products lower
also ; Gold slightly lower & Silver: slightly higher; US $ higher vs. Euro,
but off against Yen basis the Dec futures.

Cash Markets

--CIF Corn steady. Nov. +55 to +57, Lh Nov. +57 to +60, Dec. +59 to +61,
Jan. +49 to +52, Feb. +49 to +53, Mar. +49 to +52, A/M +40 to +43

TREND:

Corn has continued to develop momentum this week refusing to correct from
this test of the upper end of the trading range of the last several months.
A good part of the gains has come off the basis gains. Assume the futures
need to help put farmer corn into the pipeline. This means tightening
spreads to go along with the firmer basis. Have to take some of the carries
away to pick up ground pile or prevent more from going down. Most of the
basis gains of the last two weeks has been due to domestic demand. Export
sales have been strong but there was plenty of harvest time cash movement to
satisfy that trade to date. I look for it to continue stronger and longer
than normal. There is a little more ocean freight showing at all points.
Most ports remain booked up at capacity for 60 days out. Look for more
activity to show out of the lakes. This might take some corn that has been
trading in rail---keeping rail relatively strong.

With reduced production estimates on corn this week, there is renewed
interest in the acreage mix for next year. Fertilizer cost continue to
escalate for those that did not book earlier supplies. The returns on 200
bpa plus corn is very hard to compete with---for wheat and for double crop
beans behind wheat. However, the US farmer has shown flexibility in plans
when the economic incentive is there. They have never before been paid $6.00
for new crop wheat prior to planting. Will pull wheat acres from areas not
expected! This leaves less acres available for the mix of corn and beans.
The bean S&D is the one in doubt with usage expected to grow more than
production with a slow down in the expansion in So Amer. Remember that
Brazil has sold $6.00 corn so this market plays well there as they look at
spring time acres. The delay in planting beans not only puts total acres in
question but also limits double crop feed grain later next year? There also
continues the tug to sugar cane. My primary concern about the bean acre
expansion is the firm Real. The chart above shows the farmer there looking
at $6.50 equivalent prices while the US farmer is looking at $10.00?



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/

DISCLAIMER: Futures and options trading involve substantial risk. The valuation of futures and options may fluctuate, and as a result, clients may lose more then their original investment. In no event should the content of this website be construed as an express of an implied promise, guarantee or implication by of from the Linn Group, Inc. that you will profit or that losses can or will be limited in any manner whatsoever. Past performance is not necessarily indicative of future results. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.

Information on this page is derived from third parties and is deemed to be reliable. STAT Communications Ltd. accepts no responsibility for errors, omissions or inaccuracies in any of the material presented on this web site. Opinions expressed on this web site are those of the respective individuals and/or institutions and do not represent the opinions of STAT Communications Ltd. or its management.