Linn Group Morning Corn Comment

CHICAGO - Oct 3/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market closed limit down in December as the grain markets saw wide
spread commodity liquidation as the turmoil in the US and global financial
situation continues.  As one trader said, the corn market is seeing the
perfect storm with negative fundamentals and negative outside markets.  The
crude oil was down over $4.50 and the US$ was up over 100 pts.  Both of
these markets play a big part in the price of grains as traders are largely
ignoring the fundamentals.  There continued to be rumors that there was big
index fund liquidation in all commodity markets.  The weather is a non-issue
right now and largely ignored by the market.  Traders are saying that the
reduction in the cattle, hog and poultry herds has reduced demand and that
is part of the reason for the break as we don't see end users coming into to
support this price break.  The corn market is down over 16% this week and
almost 50% from the highs earlier this winter.  Yield talk has been put on
the back burner this year because of all the outside influences, but most
analysts are saying they are getting reports that most farmers are
pleasantly surprised by the results so far.  The volume was ok at 230,000
and funds sold about 10,000+ contracts.

Overnight, the corn market closed up 3 cents in about the middle of the
trading range on a pretty quiet night considering the action we have seen
this week.  The outside markets were pretty quiet as well, but after the
grains closed, we now have crude down on the day and the US$ higher which
has been pressuring the grain markets all week.  Traders this morning said
we had some short covering overnight after the unexpected limit down move
yesterday, but traders are further worried about more fund liquidation.  We
can talk fundamentals and what we think is a good price for corn, but until
the funds are done liquidating, it just doesn't matter.  The funds don't
care about the fundamentals and/or insurance levels.  The corn market closed
higher last night, but I would be surprised if it can open higher today
because since the grains closed, the crude is down over $2.00 now and the
US$ is up over 50pts.  The fundamentals and weather are largely ignored
right now and the funds and outside markets are controlling the direction of
the grains.  Don't get caught in the trap of these markets can't go any
lower, they can, as we have proven the last 4 days.  The corn market is
probably over sold and due a bounce, but don't discount continued fund
selling.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCZ8                 457^2    3^2                   460^0    453^0    4495

ZCH9                475^6    2^6                   478^2    472^4    553

ZCK9                487^4    2^4                   489^4    485^0    50

ZCN9                497^4    1^4                   500^4    495^2    131

Early Opening Calls: 2-3 cents better

Top News

-- Tuesday, Oct 7th is deadline for 24,000 mt Corn tender floated by Israeli
group.  The group is also seeking 42,000 mt of Corn products & Soymeal on
the same date

-- Merrill Lynch analyst lowers fertilizer sector rating after unexpected
lower earnings at one firm and in turn that hit market share prices of most
other fertilizer companies on Thursday

-- Univ of Illinois professor tells gathering at Chicago Fed conference
farmers will see 2009 corn costs per acre at $569/ac, while the cost of
planting soybeans will be $324/ac. He cites sharply higher fertilizer & seed
cost but loan interest expenses will add to costs also. The 2009 cost per
acres figures are roughly 20% higher than the average cost in the 2003-2007
period.

-- KC Fed economist says recent survey of rural community banks shows
they're still making loans, unlike larger money center banks being squeezed
in recent turmoil.  He notes they rely more on core deposits to base lending
on rather than short term funding from other banks to expand their loan
portfolios

-- Dalian Exchange will resume trading Monday Oct 6th after this week's
public holiday in China

-- Liffe Nov corn futures were off 1.25 euro at 135 euros/mt.

-- Globex Corn Vol: 196,150; Pit Vol.: 24,684; Open Interest change: -
10,315

-- Weather: 6-10 Day Forecast: Normal to Above Temps. Normal to Above
Precip. The Corn Belt looks dry today into Saturday. Sunday and Monday will
see some showers favoring the north. Tuesday will find some showers west to
east. Temps normal to above.

-- Outside markets: Energy Complex -0.30 at $93.67; Gold & Silver: +1.0 at
$842.0 & +0.178 at $11.266; US $ is trading slightly lower vs. Yen & Euro.

Cash Markets

-- CIF Corn steady up 3. Sept. +45 to +??, Oct. +46 to +48, Nov. +48 to +50,
Dec. +50 to +52, Jan. +40 to +42 Feb. +40 to +42, Mar. +40 to +42

TREND:

Senate votes on financial bailout tonight with the House scheduled to vote
on the package Friday morning. Suspect they have enough votes to pass the
re-worked bill. Now we will see if it provides a feel good rally in the
markets. We are very oversold and it could? The problem with this is that
the fund long liquidation that has driven trade all week has left a void of
sell orders over the market. If there is a reason to rally develops, there
will not be much in the way of resting sell orders?

Corn got a lot of pricing today and should start to stabalize at these
levels. Will still have problems makign it through the 5.00 level. Try to
sell calls against a trade to that level.

Wheat will continue to chop around with a negative bias. Will see if the
6.50 to 6.40 level will provide a little support for a while. Targets should
be moved down to 6.00 to 5.90 but will not sell weakness here. Try to be
patient for a rally.

The long term charts should see some stability develop with the test of last
years break out to the top side. Note corn is still 30 cents over the level
and beans have already moved through the top by 75 cents.



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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