Linn Group Morning Corn Comment

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

The corn market ran into a combination of factors late in the day yesterday
and it couldn't hold its early gains and sold off the last hour or so.  The
corn market was unchanged, 1-3 higher most of the day in very quiet trade,
but a combination of a warmer weather forecast, CFTC ruling announcement, a
drop in crude oil prices, and an avian flu issue in Arkansas.  The CFTC
policy changes, which were announced around 12 noon, had been holding the
grain markets hostage most of the session and after the announcement,
traders were at odds over the impact.  On one side, traders said the
announcements were little more that nothing as the CFTC said it was going to
analyze everything and on the other side, traders were worried about the
CFTC getting involved in the exchanges business of margins, daily limits,
and maybe even settlement prices.  Some traders said the break was caused by
nervousness over the government dictating to index funds what they can and
can't do as many traders/funds prefer free market action to government.  The
weather forecast, while remaining wet, warms up a lot the end of the week
through early next week, which will give a nice jolt to the corn that has
been sitting in the ground or has barely emerged.  As everybody knows, it
hasn't just been the wet spring that has caused problems for farmers, but
the cold that has accompanied the wet weather.  It has been estimated that
close to 5-10% of early corn has to be replanted.  The crude oil was also
down over $4.00 during the session and closed down app. $3.50 and this
weighed on the corn market as these two commodities are still closely
linked.  Also, Tyson announced low pathogenic avian flu antibodies were
found in routine check of birds at their Arkansas facility.  Company
spokesperson says the birds will not enter the human food chain & pose no
risk to human health, but the mention of Avian flu will rattle the markets.
Volume was good at over 325,000 contracts and funds sold 5,000 contracts by
the end of the day.

Overnight, the corn market was down 3-4 cents, continuing the sell off that
began late in the day yesterday.  The grain markets are very nervous about
exactly what the CFTC is going to do and how involved they are going to
become in the markets.  Traders prefer free markets instead of the
government coming in and trying to close the barn door after the horse has
left.  With today's technology, traders are worried that excess government
regulation will chase away money from the US exchanges to foreign countries
and foreign exchanges.  We have already seen that in foreign currency and
corporations as the excessive regulations has chased those markets across
the pond to London.  The corn market is still in the trading range and just
when it looked like it could break out to the upside yesterday, it found
selling pressure, for whatever reason, and we are back in the middle of the
trading range.  Corn should find support on any strong sell off unless we
have a fundamental change in the grain markets for example a CFTC policy
switch.  You have to remember that the CFTC has very little power, but they
can scare the markets into action.  The corn is probably still in a choppy
side ways trade until we find a reason to break out of this trading range.
In talking to farmers, we are getting a lot of mixed reactions to current
crop development, but very few of the guys we have talked to are in love
with their corn so far.   The market should open in-line with the overnight
markets and then look for direction.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCN8                604^0    -4^0                  609^0    602^2    3292

ZCU8                617^0    -4^2                  622^0    616^0    167

ZCZ8                 631^6    -4^4                  637^0    630^4    2645

ZCH9                646^2    -4^6                  651^0    645^2    49

ZCK9                657^0    -1^0                  657^0    656^4    19

Early Opening Calls: 2-4 lower

Top News

-- China's CNGOIC estimated the country's Corn production for 2008 at 154.0
mln mt up from the prior estimate of 149.0 mln mt on expected gains in yield

-- USDA Ag Sec address UN group on food safety, says global community invest
in more agriculture related R&D to identify & promote new technologies to
expand crop yields in all regions of the world. Governments must also do
their part to reform food regulations & policies to ensure adequate food
supplies.

-- Low pathogenic avian flu antibodies found in routine check of birds at a
Tyson Foods, Arkansas facility.  Company spokesperson says the birds will
not enter the human food chain & pose no risk to human health.

-- USDA spokesperson says the affected Tyson Food Arkansas facility will
halt exports to Russia for 90 days, acc. to a previous Russian/US export
accord.

-- A central England poultry farm, H7 bird flu outbreak was confirmed by the
UK gov'ts head Veterinary office.  They're currently culling 25,000 animals.

-- Argentina farm leaders announced Monday they would extend their strike
until Monday June 9th.

-- Corn industry group in Argentina says the gov't approved a corn variety
that has 2 distinct transgenic characteristics in single seed.  The seed is
resistant to herbicide & pests.  The seed was developed by Pioneer Hi-Bred.

-- Pending Tenders: 30,000 mt of optional origin Rice sought in Iraqi tender
scheduled for June 8th. Delivery was unspecified.

-- Pending Tenders: 341,440 mt of Rice sought in Philippines buy tender
scheduled for June 5th.

-- Pending Tenders: CCC tendering for 40,000 mt of Sorghum on behalf of
Ethiopia

-- Dalian Corn futures were slightly lower off 6 to 1,883 Yuan/mt

-- eCBOT Corn Vol: 282,769 ; Pit Vol.: 31,276 ; Open Interest change: -
12,465

-- Weather 6-10 Day Forecast: Above Normal Temps. Normal to Above Precip.
The Corn Belt will see showers and scattered thunderstorms today into
Saturday. Sunday looks dry. Temps look to warm to above normal.

-- Outside markets. Energy -0.54 at $123.77 ; Gold & Silver: + 3.3 at $885.1
& -0.042 at $16.795; US $ is trading slightly lower vs. Euro and Yen

Cash Markets

-- CIF Corn steady 2. June +25 to +??, July +35 to +??, Aug. +32 to +35,
Sept. +36 to +42,Oct. +33 to +37, Nov. +37 to +41, Dec. +38 to +43

TREND:

At least the corn/wheat spreads moved back into vogue today moving into new
lows in the Jly contracts. Harvest pressure on KC wheat caused that market
to lose to Chi. I still favor long KC but am concerned the weaker basis
levels in soft wheat prevents marketing and takes away the harvest pressure
there. May be more comfortable with this spread in the Dec contracts rather
than Jly.

Corn held better than beans or wheat today. However a major demand share of
the corn market has a major problem developing. The ethanol crush is shown
below---both Jly and Dec



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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