Linn Group Morning Corn Comment

CHICAGO - Jan 4/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market moved higher again on Thursday as traders said another wave
of fund buying came into the market and pushed the grain market higher.
There seems to be money coming into all the commodity markets as traders
said it wasn’t unexpected to see another round of fund buying and some
speculating if the markets will be able to hold up when the fund buying
stops.  The March contract closed 3 ½ higher on moderate volume. Traders
said that funds were buyers of over 5,000 contracts at the end of the day.
The March contract made new contract highs again, but are still almost a
dollar from the all-time highs in corn set back in 1996.  Traders have been
bracing for the index fund rebalancing and new money coming into
commodities, but these recent rally’s in soybeans, wheat, and corn have been
a little unexpected.  Traders also pointed to Argentina as giving corn some
support and encouraging buying on any attempt to sell the corn market.
Argentina is the 2nd biggest corn exporter behind the US and the weather
there has been anything but ideal, but still not a major concern.  It
probably wouldn’t be much of a story in past years, but with the demand for
corn at record levels and the battle for acres here in the US, any problems
in So. America are going to be magnified.  Rains continue to fall in some
area’s in Argentina, but the temps remain hot and some area’s are completely
being missed by the rains.

The eCBOT market was lower overnight pulling back from contract highs during
the day session on Thursday.  Weekly export sales were released this morning
because of the New Years holiday and they were disappointing.  Trade
estimates were 900,000 to 1.3 mil and the actual sales were 700,700.  This
wasn’t completely unexpected this week, but still it will be looked at
negatively and will put pressure on the corn market.  Weather in Argentina
remains on every traders mind and the current forecast has scattered showers
and hot temps before a cool front comes through next week.  Weather
forecasters expect to see drying conditions in most of Argentina and could
put some stress on the young corn crop.  Weather in Brazil remains good with
few problems.  Index funds and investment funds have been the talk of the
town the last couple of days and traders will probably ignore most of the
other news until these funds are done.  China announced they were offering
to sell another 500,000 tones of corn locally.  China has offered 500,000
tones in each of the last 5 weeks with only 462,000 sold total.  The Chinese
government has reiterated that it will fight food-flation by releasing grain
from government stocks.  The corn market is expected to open a couple lower
this morning and then look for direction.  The outside markets, metals and
energies, are lower this morning and could weigh on the grains, but
remember, with the lack of other news, fund activity, or lack of activity
will probably provide the direction for the grain markets.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH8                464^0    -2^0                  468^6    463^0

ZCK8                475^2    -1^4                  479^4    474^4

ZCN8                484^6    -1^6                  489^0    484^0

ZCU8                487^2    3^2                   487^4    484^0

Early Opening Calls: down 1-2c

Top News

**USDA Corn 07/08 Export Sales Net: 700,700 mt; 08/09 Net: -12,200 mt;
expected 900k-1.3 mln mt

-- China's grain center said it plans to sell 500,000 mt of state reserve
held Corn on Jan 8th. This would be its 5th tranche of corn sold, the other
4 tranches have sold 460k mt

-- Peoples Bank of China reiterated their intention to continue tightening
monetary policy in order to prevent the economy from overheating and keep
inflation from rising. They also affirmed that they will push forward with
FX reforms.

-- China's avian flu lab confirmed an outbreak of bird flu in western
province of Xingjian, press reports nearly 5000 birds have died due to the
virus & another 30,000 were to be culled

-- May Dalian Corn futures rose 8 and settled at 1,693 Yuan/mt; while Sept
futures were 13 higher at 1,820 Yuan/mt as Sept traded 250,000 contracts

-- eCBOT Corn Vol: 109,772; Pit Vol.: 25,025; Open Interest change: +2,022

-- Outside markets: Energy Complex -.10 at $$99.08; Gold & Silver: +.4 at
$869.3 & -.020 at $15.46; US $ is slightly lower vs. Euro and sharply lower
vs. Yen

Cash Markets

                        Bean Barge       Corn Barge        SRW Barge
HRW Track       Ill Riv Frt

Jan                   +10/15 H           +32/34 H              +0/10 H
+65/70 H           370

Feb                   +21/25 H           +41/43 H              +10/20 H
+70/75 H           375

March               +27/32H                        +44/47 H
+20/30 H        +75/85 H           365

Jun/Jly              +39/41 N           -50/45 N
360

Truck                Beans   Corn     Wheat   Meal Hi-pro        Oil

Chicago                       -30 F     -7 H     -40 H

Toledo              -55 H    -13 H   -17 H

Dec ILL            -40 H    -9 H                  -5 H                -225 H

TREND:

Markets are not ready to go back down until the fund money has all found a
home. Weak cash says we may have overrun reality for a minute---long term
charts are really getting bullish because of this round of buying in beans
and corn both. Implies another leg up if confirmed with strong closes for
the week. However, with these price levels corrections can be deep. There is
still some concern about the crop repot on Jan 11 and the implications with
changes in acres and yields.



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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