Linn Group Morning Corn Comment

CHICAGO - Jan 13/09 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market closed limit down on Monday as the USDA surprised even the
biggest bears with it's ending stock number.  The market was expecting a
bearish report with the average analysts estimate at 1.499 and the USDA
released a number of 1.790 which was much higher, which basically will allow
US farmers to plant 2 mil less acres of corn and it won't be an issue.  Most
months in corn closed limit down and synthetically, corn closed another 7-8
cents lower vs. the March.  The market was waiting for an increase in the
carry out number, but they were blown away by the decrease in demand for all
areas, exports, ethanol, and feed usage.  The corn market had rallied the
last 4-6 weeks with the bean market on weather and technical indicators, but
it was following it gingerly on light volume and now we know why.  The USDA
also increased production a little bit when many in the marketplace were
looking for a decrease in production because there is still corn out in the
fields, especially in the northern states.  The corn market should continue
to find pressure on any attempt to rally now as there is a huge crop in the
US, the need to plant less acres is already built in to the market with the
huge carryout, and US corn is much higher priced than the rest of the world.
The volume was only 120,000 contracts and funds sold 4,000 contracts, but
that was muted because of the limit down move.

Overnight, the corn market traded down to the synthetic level on the close
yesterday.  The March contract closed down about 7 cents last night after
trading about 10 lower during the night.  The corn market continued lower as
expected after yesterday's limit down move, but we didn't see another big
move overnight.  The soybean market actually traded a little higher
overnight which many have helped corn not extend lower, but there is no
reason to think that the corn market can extend any rally.  The significance
of the USDA report yesterday can't be lost on the market as the big carryout
is like finding another 2 mil acres of corn yesterday.  That means, we can
reduce corn acres by 2 mil this spring and it should have zero affect on the
price of corn.  The demand for corn was reduced in all areas, feed, ethanol,
exports and there isn't anything telling us this is going to get any better
in the future unless we see a major change.  The corn market should open
lower this morning and then it might find some buying as we see some short
covering, but I would expect any attempt to rally corn will be met with
selling pressure.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCH9                373^2    -7^4                  375^6    369^6    11951

ZCK9                384^0    -7^2                  386^0    380^6    1123

ZCN9                394^2    -7^2                  396^4    390^4    728

ZCU9                401^4    -9^6                  409^0    401^4    10

Early Opening Calls: off 5-8 cents

Top News

-- 55,000 mt of US Corn was bought by S Korean feed group on Tuesday at a
reported price of $187.00/mt c&f, acc. to traders.  Delivery is expected in
by March 30th

-- Monday's USDA Weekly Corn Inspections: 20.013 mln bu ; expected 26.5 mln
bu

-- Experimental cellulosic ethanol plant was opened on Monday by ethanol
producer Poet.  The $8 mln pilot plant is expected to make 20,000/yr of low
carbon motor fuel & could be the model for a larger plant planned for Iowa
in 2011.

-- Cargill reports net earnings in the 2Q of $1.19 bln, notes the Mosaic,
its investment in fertilizer, was a major contributor to earnings

-- After week long Lunar New Year holiday, Dalian Exchange plans on
temporarily expanding limits on soy & soy products, corn & palm oil futures
on Feb. 2, 3, 4th.  They'll expand limits by 6% instead of the normal 5%
limit.

-- Hungary's 2008 grains crop was estimated by the gov't at 16.9 mln mt, up
from the 9.65 mln mt seen in 2007.

-- May Dalian corn futures were off 19 Yuan at 1,548 Yuan/mt.($1 = 6.84)

-- Liffe Mar corn futures were unchanged at 125.75 euros/mt.

-- Globex Corn Vol: 109,358; Pit Vol.: 6,209; Open Interest change: + 2,656

-- Weather: 6-10 Day Forecast: Below Normal Temps. Normal to Below Precip

-- Outside markets: Energy Complex +0.36 at $37.95; Gold & Silver: -1.9 at
$818.9 & -0.288 at $10.482; US $ is slightly better vs. Yen & Euro.

Cash Markets

-- CIF Corn steady up 1 . Jan. +44 to +47, Feb. +43 to +46, Mar. +43 to +45,
Apr. +33 to +37, May +37 to +38, June +33 to +37,July +36 to +37, Aug. +36
to +41, Sept. +38 to +43, Oct. +39 to +??

TREND:

MERC has posted expanded limits for all grains except oats and soyoil. Wheat
goes to expanded limits even with the settlements off limit slightly. Note
it is likely that margin requirements expand to go along with the expanded
limits

Corn traded as much as 8 cents below limits down to 3.72. The expanded down
side passed right through the 3.83 support and now sets up a test of 3.65.
The corn spreads did not widen as much as I expected them to with the cash
remaining firm on the break in futures. Barge freight is up sharply as the
driving force on the basis today.

The wheat trade went to limit but was not offered hard enough to press below
60 lower on the day. Closes 10 cents over a 50 pct retracement---not sure I
want to press past that level



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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