Linn Group Morning Corn Comment

CHICAGO - Oct 1/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market sold off on Tuesday as the USDA report showed a bigger
ending stocks number than expected and the US$ climbed to new highs.  The
December contract was down over 25 cents closing below $5 for the first time
since January.  The market has been largely ignoring fundamental data, but
the USDA announcing a bigger expected carryout was too much for the market
to ignore, especially with the reduction in demand.  Traders pointed to a
reduction in domestic feed usage as the reason for the increase as different
livestock producers fed more wheat and less corn.  This has been rumored for
months.  This increase in the ending stocks is like adding 500,000 acres to
harvest.  The corn market bucked the trend with crude oil as that market was
higher, probably on some short covering after the big sell off on Monday.
Traders also said the unexpected increase in the good/excellent numbers on
Monday afternoon helped pressure the corn market.  Traders also pointed to
end of the month and end of quarter fund liquidation as part of the reason
for the sell off, especially late in the session.  The volume was pretty
heavy at almost 300,000 contracts and fund liquidation was estimated at
7,000 for index funds and 12,000+ for regular managed funds.  The weather
remains a non-factor with late season crop development still not being
threatened except for the far northern areas.

Overnight, we saw the corn market open higher and trade higher the whole
night session as we probably had some short covering after the corn market
dropped 10-12 cents late in the session.  Traders said we probably saw some
short covering last night as the late sell off came fast and furious and
didn't give guys a chance to cover positions.  The corn harvest is beginning
to pick up steam now and the yields we are hearing about are pretty good,
nothing real bad and most guys are saying they are pleasantly surprised.
So. Korea bot 275,00 mt of US feed grain corn overnight which we haven't
seen in awhile.  The crop weather remains a non-factor as we haven't had a
frost/freeze in any of the major growing areas.  The corn market should open
higher this morning, but keep an eye on the outside markets as we have the
crude oil market lower and the US$ higher.  Both of these should help
pressure the grain markets today, but the grains have dropped a lot in the
last week and may just be over sold.  I don't know if you are going to find
a lot of traders willing to sell the corn market lower from here, but I
think corn will find sellers on any attempt to rally and the funds could be
the wild card as they don't care when they want to get out, they just sell.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCZ8                 494^6    7^2                   500^0    492^4    7202

ZCH9                512^4    6^0                   519^0    511^2    610

ZCK9                524^0    5^4                   530^0    523^0    128

ZCN9                535^6    6^2                   543^0    535^6    267

Early Opening Calls: slightly better

Top News

-- 275,000 mt of US Corn bought by S Korea for January delivery.  Feed mill
group bought 165,000 mt of feed grain corn Wednesday, while another group
bought 110,000 mt late Tuesday afternoon

-- Ethanol production in July rose by 4.9% to 614,000 bpd from the prior
month, acc. to EIA data.  Stockpiles of ethanol for July were pegged at 13.1
mln vs. June's 12.3 mln

-- 2009 will see $3.1 Bln in export credit guarantees offered by the USDA
under the GSM-102 loan program, acc. to an announcement made yesterday by
the agency

-- Ukraine ag minister noted grain exports in the July to Sept period have
totaled 6.2 mln mt & reiterated the yearly export forecast at 22.6 mln mt

-- Ukraine ag minister raised the country's 2008 total grains harvest figure
by 400,000 mt to 48.6 mln mt.  He also noted Corn harvest is expected better
at 7 mln mt, up from prior estimates of 6 mln mt.

-- Argentine farmers gathering to consider additional protests, proposals
range from 3 day halt in grain & oilseed sales to outright strike.  Other
reports have them starting a strike this Friday & lasting for 6 days.

-- S African White & Yellow Corn deliveries from farm to storage rose
slightly to 10.92 mln mt up from the prior week's 10.88 mln mt

-- Dalian Exchange is on public holiday from Sept 29 through Oct 3rd

-- Liffe Nov corn futures were 1.5 euro better at 140.5 euros/mt.

-- Globex Corn Vol: 264,101; Pit Vol.: 37,266; Open Interest change: + 121

-- Weather: 6-10 Day Forecast:  Normal to Above Temps.  Normal to Above
Precip. The Corn Belt looks dry today into Saturday. Chances of showers
Sunday favoring the north. Temps  warm some late week to  normal to above.

-- Outside markets: Energy Complex -1.60 at $99.04; Gold & Silver: +2.3 at
$877.6 & +0.098 at $12.346; US $ is trading slightly better vs. Yen & Euro.

Cash Markets

-- CIF Corn  steady  up 3. Sept. +44 to +46, Oct. +44 to +46, Nov. +46 to
+50, Dec. +49 to +51, Jan. +38 to +40 Feb. +38 to +40, Mar. +38 to +40

TREND:

Crop report set in motion a negative feel for all the markets. Wheat tended
to be supported on liquidation of corn/wheat trade.

Look for wheat to join in the bearish hunt quickly.

Corn is at the support on the long term charts even if down into new lows on
the daily chart. Need to bounce back quickly and get back above 5.05 or this
market could extend weakness to test of 4.50.



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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