Linn Group Morning Corn Comment

CHICAGO - Jan 14/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

Wow.  The corn market reacted to the USDA report in a big way closing limit
up, never really trading off the limit price right from the opening.  In
talking to traders before the opening, up until right before the opening,
most didn’t think that we would trade limit up right from the opening and
then lock limit up for the whole day.  I guess that is what happens when we
get a significant decrease in final yield and a lower than expected drop in
ending stocks.  Corn is now officially in a fight for acres with beans as
many traders/farms expected US farms to switch over to beans this spring
because of the difference in prices.  Many traders will be trying to figure
out if farmers will be looking to switch their planting decisions since the
USDA report and the price movement.  Traders seemed to think the US had a
cushion in ending stocks, but when the USDA lowered the number to below 1.5
bil bu, all bets were off and the market was off to the races.  Weather in
So. America remains a non-factor as many of the growing areas are receiving
rains, but the US markets seemed focused on buying corn acres.  Corn is
entering the key pollination stage in Argentina, so it will be interesting
if the market reacts to the weather or just doesn’t care right now.

The eCBOT market was higher overnight which wasn’t unexpected as we closed
limit up and the synthetics indicated that the futures market should be
trading another 10-11 cents higher.  The March contract overnight closed 15
½ higher on the night session on pretty big volume as the volume was muted
on Friday with the limit up trade.  Export sales remain very strong as the
USDA announced another 116,000 in US corn sales to So. Korea.  The corn
market will be very strong again this morning and it will be interesting to
see if it stays the course or if we see some profit taking.  It doesn’t look
like we are going to see anybody willing to step out and sell the market
until the demand declines and that doesn’t look like it is happening yet.
We look for corn to open higher this morning in-line with the overnight
markets and see if it finds new strength.  The USDA report is still being
digested and we will find out if all the buying got done last night or if
there is still buying to be done this morning.  Traders are nervous and you
will hard pressed to find anybody willing to step out and sell the corn
market.  Corn should continue to be strong this morning and traders will
start to look at the weather in Argentina more and more now that the USDA
report has happened.

eCBOT Overnight

Contract            Last      Net Change       High      Low

ZCH8                510^4    15^4                  512^6    503^0

ZCK8                522^2    16^0                  524^2    514^6

ZCN8                532^4    16^4                  534^4    525^2

ZCU8                528^0    14^0                  530^0    520^2

Early Opening Calls: 14-16c better

Top News

*USDA reported private sale Monday of 116,000 mt of US Corn sold to S Korea
for 07/08 marketing year

*40,000 mt of US Corn bought by Israel in Monday tender acc. to traders.  An
additional 15,000 mt of US Corn products bought also

-- Tender set for Jan 16th for 35,000 mt of US Corn & 12,000 mt of US
Soybeans by Sugar Corp of Taiwan.  Delivery is expected during Feb-Mar
period. Monday's announcement comes after last week's failed attempt to
purchase similar quantities.

-- Amer. Farm Bureau economist sees Corn planted acres at 88.0 mln acres,
down from 07/08 93.6 mln. Harvested corn acres at 81.0 mln ac down from he
86.5 mln in 07/08.  Yields for 08/09 were estimated at 154.0 bu/ac up from
the 151.1 bu/ac last projected by the USDA

-- Argentine Corn seedings stand at 93% complete vs. 90% last week, but
behind year ago pace of 97% complete, acc. to data released by the Argentine
Ag Sec office

-- Undisclosed sum of money invested by General Motors in biofuel maker
Coskata. The small refinery reportedly has developed a economically viable
process to produce cellulosic based ethanol in 3 years time.

-- Dalian Corn futures rose 8 to 1,842 Yuan/mt in overnight trade $1=7.255
Yuan

-- eCBOT Corn Vol: 115,066; Pit Vol.: 26,610; Open Interest change: +10,303

-- Weather: 6-10 Day Forecast: Normal to Below Temps. Normal to Below
Precip. The Corn Belt will see some light snow and flurries today and
Tuesday. Wednesday into Friday looks dry.

-- Outside markets: Energy Complex +.94 at $93.63; Gold & Silver: +10.2 at
$907 & +.025 at $16.399; US $ is down vs. Yen and Euro

Cash Markets

-- CIF Corn off 2 to 9. Jan. +22 to +28, Feb. +24 to +31, Mar. +26 to +33,
Apr. +28 to +31, May +29 to +34, June +26 to +32, July +30 to +36,

TREND:

There is no mistaking the enthusiasm for the markets today. The buying was
perverse and panicky. Have to assume some of it was short covering and not
new longs. Open interest has gained sharply this past 10 days. The trade
last year ended after a few days of rally. There is already the feeling of
rationing developing with the cheaper basis levels.

The wheat market got a boost led by the new crop today. Look for that market
to be hard to push higher. We moved to a corn/wheat position more
aggressively this week as the wheat market started to develop cracks in the
armor---most specifically the inverses melting away. Cash is also soft in
spite of tight inventories. Continue to look for cancellations of sales of
hard wheat out of No African destinations. Other origins are steadily
replacing US wheat into those markets.



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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