Linn Group Morning Corn Comment

CHICAGO - Jun 9/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market surged higher to new all time highs on Friday as the market
reacted to the explosion in crude oil prices and the rains that are falling
across most of the Midwest. The July and December corn closed over 7 cents
higher on the day, but it was up over 20 cents early in the session.  The
December corn got within 10 cents of the magical $7.00 price level. The
crude oil market surged over $10 higher on Friday, helping the grain complex
move higher.  Rain fell across most of the corn belt again, soaking and
causing flooding in many areas that already had too much rain.  Some areas
have received more rain in the last 10 days as they usually get the whole
spring.  These rains are not only not allowing farmers to plant the
remaining 5+ mil acres that haven't been planted yet, but the corn that is
in the ground is being flooded out or drowned.  The ending stocks in corn
was already low and with the problems this spring, demand and usage will be
cut, but there won't be enough acres and/or a big enough yield to make a
difference.  The energy markets are still a big factor in the grain markets,
even with a recent disconnect, but you can't ignore a $10 surge in crude oil
prices.  The volume on Friday was huge at almost 500,000 contracts and funds
were net buyers of 12,000+ contracts.

Overnight, corn continued its surge higher as rains fell across most of the
Midwest adding to the already saturated fields pushing planting back again,
almost to the point where you can't plant corn anymore in most areas.  Many
fields are already saturated, so new rains are just creating ponds and
washouts that can't be replanted because it is so late in the session.  The
July, Sep, and December corn all closed up over 16 cents which was about 4-5
cents off the highs overnight.  The rain forecast continues to have rains
across the Midwest this week.  The market will await the crop condition
report that will be released after the close today and the supply/demand
report that will be reported tomorrow morning before the opening.  Different
analysts are predicting an increase in 07/08 stocks because of the release
of the previously protected land for grazing.  The bottom line is that
traders will try and position themselves for reports tonight and tomorrow,
but they can't ignore the rain, the reduction in acres, and the good
possibility that yields are going to reduced.  Different traders/analysts
want to talk about a 148-149 average yield which would be much lower than
the average yield of app. 154 from earlier reports.  We will get a yield
indication in the supply/demand report, but the USDA will most likely leave
the acreage number alone and will make an adjustment to that on the June
30th report.  Corn should open strong today, but it could run into some
profit taking early in the session.  Unless we have a change in the
fundamental picture or a major change in the weather forecast, look for corn
to finish strong.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCN8                667^4    16^6                  673^0    660^6    10051

ZCU8                679^4    15^6                  685^2    672^0    1879

ZCZ8                 694^0    16^2                  698^4    688^0    9828

ZCH9                705^6    14^0                  712^4    699^2    324

ZCK9                715^0    18^0                  718^6    697^0    99

Early Opening Calls: 13-15c better

Top News

-- Brazil's Conab estimated total Corn production at 58.43 mln mt up from
May's estimate of 57.87 mln mt

-- Ministry of Finance in Bangladesh announced plans to buy up to 3.2 mln mt
of food grains for emergency stockpiles by summer of 2009.  That's a jump of
2.2 mln mt from current levels.  They plan on meeting goals through domestic
output, imports & aid assistance programs.

-- Congressional aides say a bill that was is intended to lower the ethanol
import tariff in step with blending subsidies was sent to the Senate finance
committee & would likely never make it out of committee.

-- Dalian Commodity Exchange closed for holiday on Monday, trading will
resume Tuesday June 10

-- eCBOT Corn Vol: 405,772 ; Pit Vol.: 57,287 ; Open Interest change: -
10,746

-- Weather: 6-10 Day Forecast: Normal to Above Temps. Normal to Above
Precip. The Corn Belt will see chances for scattered showers and
thunderstorms each day this week. Temps look to be normal to above.

-- Outside markets. Energy: -1.77 at $136.77; Gold & Silver: +9.2 at $904.6
and -0.017 at $17.419 ; US $ is trading better against the Euro and Yen

Cash Markets

-- CIF Corn steady off 3. June +26 to +32, July +36 to +38, Aug. +33 to +36,
Sept. +37 to +42,Oct. +36 to +37, Nov. +36 to +37, Dec. +39 to +44

TREND:

There is no doubt that the trade Fri had a positive influence in the energy
rally. This tugged the CRB into a break out to the top side of the flag
pattern that could imply stronger upside influences in all markets.

The reaction to higher energy prices becomes very important due to the
profitability to ethanol and biodiesel operations. The fact that profitable
corn hedges were not sufficient to keep ethanol plants running surfaced
again this week with indications some were liquidating profitable long corn
hedges forcing the plants to stand on their own in new corn purchases.
Stocks ownership will not allow hedge profits to be ground into losses? We
have adjusted the cost of operations in the charts below taking estimates up
to accommodate the higher nat gas prices. The problem with this is that the
map takes away the profitability that was there in earlier periods when the
nat gas costs were lower. The biodiesel profitability also appears to be
elusive even with the rally in petroleum prices

The crop report will be released on Tues AM prior to trade so could have a
great deal of influence to the trade over coming weeks. It is highly likely
that the USDA will show larger ending stocks in corn and smaller stocks in
beans. The wheat crop will be much larger than the May report. It is
probable the USDA lowers the corn yields for new crop but bean yield changes
will most likely be reserved for the Jly report after the Jun planting
report updates the acreage.

The grain market may have a new found fundamental that overweighs the loss
of profitability in the bio-fuel industry. Stay tuned.



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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