Linn Group Morning Soybean Comment

CHICAGO - Jan 8/08 - SNS -- Following is the morning soybean futures comment from the futures commission brokerage firm Linn Group.

The soybean market was lower on Monday on the back of profit taking, fund
front-running and weekend rains in So. America.  The March contract was down
over 12 cents as traders pointed to recent rallies and profit taking.
Traders are also nervous about the fund re-balancing that has been talked
about for the last 2 weeks that is supposed to start today.  The news on the
fund re-balancing has the index funds buying corn and selling beans and
wheat.  This news has made traders a little nervous about buying beans this
week.  Traders were also front running the expected fund selling and that
added pressure to the bean market on Monday when there was very little new
news released.  Also this week, the USDA releases its final 2007 crop report
and that has many traders on the sidelines.  Weekend weather in So. America
was negative for beans because there was talk of hot, dry weather causing
damage, but weekend rains helped ease some of those fears.  Volume was
average and funds were estimated to have sold 4,000+ contracts by the end of
the day.  Weekly import inspections were also below estimates.

eCBOT market was higher overnight on talk of China being back in the market
for importing beans.  Overnight, there were reports from China that they
were in the market to import another 1.1 mil tones of beans.  This helped
push beans higher after we saw what China buying did to the bean market back
in Nov/Dec.  Traders also pointed to soybeans finding support from the
outside markets with gold making all-time highs overnight, crude oil up over
$2.00 and a weaker US$.  The funds should dominate the trade today as
everybody is looking for fund rebalancing.  Brazil released its latest crop
estimate of 58.2 MMT vs. last year, 58.4 MMT, but some traders want to
increase yields because of near perfect weather so far this growing season.
The better yields may make up for lower yields in Argentina.  The soybean
market will open higher this morning with the outside market higher and talk
of China back in the market to import beans.  The funds will probably
determine the direction as traders expect funds to be selling beans as part
of the re-balance, but maybe it isn't big enough to stop the market from
going higher?

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZSF8                1244^2  8^2                   1245^0  1239^2

ZSH8                1257^4  7^6                   1260^6  1249^2

ZSK8                1277^2  8^6                   1277^2  1267^4

ZSN8                1285^0  8^6                   1286^0  1274^0

ZMF8                340.6    2.7                    340.6    337.0

ZMH8                346.8    2.3                    347.8    343.1

ZMK8                350.6    1.1                    352.7    349.5

ZLF8                 50.20

ZLK8                 51.47    0.08                  51.47    51.20

Early Opening Calls: 6-8c better

Top News

-- Conab's January Brazil 2007/08 Soybean crop is estimated up slightly
50,000 mt to 58.16 mln mt vs. December's estimate of 58.11 mln mt.

-- Monday's USDA Soybean Inspections: 24.798 mln bu.; expected 26.5 mln; vs.
prior week 25.554

-- Dalian Soybean futures fell in overnight trading, Sept contract 8 lower
at 4,730 Yuan/mt; Sept Soymeal rose 15 Yuan; Soyoil futures fell 52 Yuan to
10,418 Yuan/mt

-- Malaysian Palm, Backing off record highs, Malaysian palm oil futures fell
$8.25 to $967/mt basis the March contract

-- eCBOT Soybean Vol. 114,049; Pit Vol. 25,438; Open Interest Change: -3

-- Weather: 6-10 Day Forecast: Normal to Above Temps. Normal to Below
Precip. The Corn Belt will see showers and rains today into tonight.
Wednesday looks dry. Thursday could see more showers. Friday and Saturday
look dry. Temps normal to above.

-- Outside markets: Energy Complex +1.63 at $96.72; Gold & Silver: +13.0 at
875.4 & +.273 at $15.56; US $ is higher vs. Yen and lower vs. Euro

Cash Markets

-- CIF Soybeans off to 7. Jan. +5 to +10, Feb. +10 to +18 Mar. +15 to +25,
Apr. +15 to +20, May +?? to +30, June +28 to +32, July +27 to +35.

TREND:

Wheat trade continues to look like it wants to break down. Watching the H/N
in Chi waiting for it to fall through the bottom of the recent chart---and
KC snuck up on me and did it first?

KC also lost a little to Chi in flat price.

This was widely thought to be trade front running rebalancing expected to
start tomorrow. This was also part of the support in corn as trade bot corn
vs. selling wheat and beans.

Market is not going far in front of the crop report on Fri AM.

Note the reason for increasing corn use in the tables was the improved
margins on ethanol. Those have totally melted away over the last 3 days
trade. The Jly is shown below with almost a $1 loss per bu of corn
ground---amazing. The Mch contract still shows a 40 cent contribution to
variable cost but is no longer profitable either



To discuss this report further or for specific trade ideas please contact me
directly

Nathan T. Smith III
Linn Group
nsmith@linngroup.com
toll free: (877) 787-6278
local: (312) 896-2090
fax: (312) 896-2050
www.linngroup.com/

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