Linn Group Morning Corn Comment

CHICAGO - Oct 15/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was trading higher most of the day, only to follow the
outside markets and the soybeans lower the last 15 min of the day.  The
December contract closed down ¼ on the day, but that was over 12 cents off
the highs.  With little new fundamental news, the grains are watching the
outside markets, crude, US$, stocks, for direction.  We are continuing to
see liquidation in the commodity markets as the world markets try and decide
how big of a problem we have in the financial world.  Some traders/analysts
are saying that we are seeing some buying on weakness, but I would counter
that we will see bigger selling on strength.  The demand situation for
commodities across the world is declining and grains could be hurt the worst
because China and other developing countries have been the biggest importers
of US grains.  We should see some pricing of corn and some good exports, but
I wouldn’t expect to see any aggressive buying until the market decides that
we at least have a temporary bottom in the market.  The volume was the
usual, around 150,000 contracts and funds were mixed maybe a little
positive.

Overnight, the corn market traded higher on the opening and then flirted
around the unchanged level before selling off after midnight into the close
this morning.  We are still probably seeing fund liquidation and we continue
to get news out of China that their imports are slowing down which we be
negative grains.  We have been preaching for months that the size of the US
crop won’t matter if we see a reduction in demand and that is what we are
seeing.  Crop progress released after the close showed corn harvest at 21%,
about 20% below the average, but not surprising with the late planting and
the delays from rain across parts of the Midwest last week.  These numbers
are usually brushed off because of the global financial crisis and because
the corn will get harvested and demand isn’t huge, today, for corn.  The
outside markets right now should help push the grain markets lower this
morning with crude oil down $3 and the US$ higher.  Traders/analysts want to
sell the grain markets as there is more talk that hedge funds haven’t
completely liquidated commodity positions and the fundamentals point to
weaker demand, thus lower prices.  There also seems to be a sentiment among
farmers that prices “just have to go higher”.  Until we get rid of this
attitude, we probably haven’t seen the lows yet.  The corn market should
open a couple lower and then look for direction.  The crude oil is $2-3
lower than when the grains closed earlier this morning, so that could add to
the weakness.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCZ8                 408^6    -2^4                  416^0    408^0    5959

ZCH9                426^4    -2^4                  433^0    425^4    774

ZCK9                437^6    -3^0                  444^6    437^6    25

ZCN9                449^0    -2^6                  453^4    449^0    59

Early Opening Calls: off 1-3 cents

Top News

-- 60,000 mt of Argentine Corn was bought by Malaysia on Wednesday for
delivery in November, acc. to traders.  Malaysia says it bought the corn for
$220/mt

-- 100,000 mt Feed Barley tender floated on Wednesday by Jordan's state
grain buying arm in a tender expected to conclude Oct 30th.  The grain is
expected in 2 tranches of 50k mt each, one tranche for delivery in FH Jan &
the balance in LH Jan.

-- USDA weekly progress report showed corn Mature 86%, that's behind last
year's pace of 97% & the 5 yr avg of 95%.

-- USDA weekly progress report showed corn Harvested 21%, that's behind last
year's pace of 50% & the 5 yr avg of 41%.

-- Latest weekly Corn conditions were slightly changed: vp-poor category 13%
vs. prior week's 13%, fair category 25% vs. 26% last week & combined
good-exc categories were 62% vs. 61% last week.

-- Tuesday's USDA Weekly Corn Inspections: 29.132 mln bu; expected 34.5 mln
bu

-- At Wednesday's intervention tender by the Russian gov't 12,690 mt of feed
Barley was purchased, bringing this week's total to 31,455 mt

-- Workers' union & shippers on St Lawrence Seaway reached a prelim
agreement for a new contract on Tuesday, averting a possible strike that
could have impacted grain shipments from interior Canada.

-- Dalian May corn futures were off 32 Yuan at 1,635 Yuan/mt.

-- Liffe Nov corn futures were off 2 euro at 128 euros/mt.

-- Globex Corn Vol: 128,027; Pit Vol.: 9,737; Open Interest change: + 760

-- Outside markets: Energy Complex -2.75 at $75.88; Gold & Silver: -4.6 at
$835.4 & -0.722 at $10.338; US $ is trading slightly better vs. Euro & is
off slightly vs. Yen.

Cash Markets

            Bean Barge       Corn Barge        SRW Barge       HRW Track
Ill Riv Frt

Oct       +53/55 X           +56/58 Z             -80/-75 Z         +84/??
675

Nov       +60/64 X           +54/56 Z             -70/-65 Z         + 88/95
Z         550

Dec      +52/56 F           +55/57 Z             -70/65 Z          + 88/98 Z
475

Truck                Beans   Corn     Wheat   Meal Hi-pro        Oil

Chicago                       -45 X     -19 Z    -200 Z

Toledo              -48 X     -28 Z    -180 Z

Dec ILL            -20 X     -18 Z                 - 15 Z  -150 Z

TREND:

Weak basis levels on beans responsible for the weakness late in the day. The
move took beans back to test the limit down trade from the report last Fri.
Have to hold here or we start another big leg down. Is much too bearish so
should not happen---can make new lows but may not be able to hold it? Oil
was the bad leg with crude helping depress that market. Have made down side
counts in meal and oil both so will not press those markets at this level.
Will find the will to sell a rally

Corn had support from what appeared to be corn/wheat and corn/bean
spreading. Look for a sideways trade here---be short puts and calls for a
trade



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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