Linn Group Morning Corn Comment

CHICAGO - Jun 12/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market surged higher on Friday as the market finally believed that
flooded fields and concerns about crop production.  Corn closed limit up, 30
cents, across most months and synthetically, the corn market was app.
another 15 cents higher.  The July corn contract hit $7 for the first time
as the rally continued from Tuesday when the USDA released their yield
estimate of 148.9.  This is the rally that many traders expected on Tuesday,
but didn’t happen until late in the session.  As one trader described the
corn market right now, it is a perfect time as the corn is still in big
demand, ending stocks aren’t big, the US didn’t get enough acres planted,
and the yield is going to suffer because of tough planting conditions.  It
is still almost impossible to predict what the corn yield will be right now
because as we have found out in years past, corn can finish well and produce
a great crop.  There is no doubt that the corn crop is way behind past years
and that has proven to be a problem in the past, but genetics seem to prove
past predictions wrong.  With corn acres down this year, we needed almost
perfect weather to produce a great crop and we just haven’t gotten it this
spring.  Rains are expected the next couple of days across some of the hard
hit areas of Iowa, MN, WI, and IN, but then the weather is expected to clear
next week, but it will be cooler than normal.  Volume was average yesterday
because of the limit up moves for ½ the day, but option volume was huge and
funds were buyers of 20,000+ contracts on the day.

Overnight, corn extended early to the synthetic prices on the close, up
another 15-17 cents, but eventually the market sold off on profit taking and
outside markets.  We saw the corn market react as it should, trading up to
the synthetic price levels, letting shorts out of the market, but then
profit taking took over and the market sold off the highs.  We are in a huge
bull market and you need new gasoline to keep feeding the fire and when you
don’t get it, the market is going to set back.  Weekly export sales were
released this morning and they were within the expectations of 450,000 to
750,000 at 578,600.  Weekly export sales have been largely ignored the last
2 months as traders have concentrated on weather and getting the crops
planted, but it is still nice to see good sales, every week.  Be careful
with today’s trade as the market could set back after the big run up we have
had this week.  I would say that yesterday’s market caught some traders and
shorts off guard as many was expecting this trade on Tuesday and they didn’t
get it.  The exchanges are raising margins as of Thursday night, so we will
see some liquidation today which could help support the market.  The outside
markets are fighting a higher grain market today as the US$ is much stronger
and crude oil is down $3.00 already this morning.  The fundamentals haven’t
changed in corn, but we are not going to go straight up.  Including last
nights action, the December corn is almost 70 cents off the lows the last 3
days.  These big markets are going to have big swings and bigger ranges.  We
look for the corn market to open unchanged, slightly higher, but don’t be
surprised to see a set back in corn today.  The key today will be if corn
gets 10-15-20 lower, do we see buying.  Dangerous markets give us big
returns and even bigger risk.  Trade smaller, trade options to reduce this
risk.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCN8                704^4    1^2                   721^6    704^2    16848

ZCU8                718^2    1^4                   735^0    718^0    3423

ZCZ8                 734^6    2^0                   751^2    733^6    9830

ZCH9                747^4    0^4                   763^6    747^0    314

ZCK9                752^2    0^0                   767^0    752^2    46

Early Opening Calls: 1-3c better

Top News

**USDA Corn 07/08 Export Sales Net: 524,600 mt; 08/09 Net: 53,800 mt;
expected 450-750k mt

-- As water levels rise, US Army Corp of Engineers close lock #17 along the
Mississippi River near New Boston, IL.  Engineer corps says further lock
closures are expected over the next few days & could last as much as 10 days

-- Strategie Grains estimates EU corn production at 58.4 mln mt up from last
season's 47.9 mln mt, on an estimated yield of 6.8 mt/ha and with 8.6 mln ha
planted.

-- China's May consumer prices growth was estimated to have been on a 7.7%
rise vs. the prior month's 8.5% growth pace, the May figure was slightly
below 7.9% pace estimated by economists

-- Corn futures were modestly higher on the Dalian exchange in overnight
trade, active Jan futures were 7 higher to 1,916  Yuan/mt

-- eCBOT Corn Vol: 246,132 ; Pit Vol.: 32,418 ; Open Interest change: -
10,492

-- Weather: 6-10 Day Forecast: Normal to Below Temps. Normal to Above
Precip. The Corn Belt will see showers and thunderstorms moving west to east
today. Friday showers end in the east. Saturday into Monday looks mostly
dry. Temps near normal. Early morning weather maps suggest a drier pattern
for the Corn Belt may start to set up by the middle of next week.

-- Outside markets: Energy complex -2.38 at $134.00 ; Gold & Silver -14.3 at
$865.5 and -0.453 at $16.404 ; US $ is trading better vs. Euro and Yen

Cash Markets

-- CIF Corn steady up 5. June +37 to +45, July +37 to +44, Aug. +33 to +37,
Sept. +36 to +42,Oct. +33 to +37, Nov. +34 to +39, Dec. +37 to +41

TREND:

Wheat continues to short cover. This is the driving force but the rains over
Okla. and E Kan may have some concerned about cash is diverging hard wheat
production while talk of rains over So Ill and Ind has created concern about
soft wheat. Buy stops were triggered at 8.35 to 8.44 with one more strong
close need to confirm a target of around 9.35.

Corn shows no signs of setting back from this rally building momentum.
Technicians will be ready to take profits all the way up but suspect the
user that does not have coverage will be forced to pay up for the coming two
weeks. At some point the lack of user interest will become important but I
am growing more certain that the end of this market come with a Government
action to slow usage. Upside targets are very difficult to identify but
$7.25 to 7.35 on a front month look to be nominal. I continue worried about
a much larger rally and am trying to keep the top side open. Take puts for
down side protections.

I also have a growing concern that the short hedger here will start to get
stretched again just like the wheat market did in Mch. The problem is the
farmer sales in corn are much larger than in wheat and that means the margin
calls will get larger faster. This is very bearish new crop basis
levels---selling cash is the only way they have to get out from under short
hedges?



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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