Linn Group Morning Corn Comment

CHICAGO - Jul 1/09 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was limit down yesterday and it didn't have anything to do
with the outside markets.  The USDA shocked the market with a huge acreage
number beating all estimates and pushing corn through the March lows.  Corn
traded in the opening minute but then went limit down for the rest of the
day.  The July contract which has no limits because it is in delivery,
traded about 35 lower at one point during the day.  The limits will be
expanded today to 45 cents.  The trade was looking for around 84 mil acres
and the USDA report estimated acres at 87 mil which was 3 mil from the
average estimate and 1 mil more than the highest estimate.  Many traders
felt that this acreage number is too big and there is no way we will have
that many acres planted when the final acreage numbers are released later
this year, but it doesn't matter as the market is trading the USDA number
they released today.  We saw fund liquidation and the "get me out at any
cost" trading happening yesterday as traders just couldn't take it anymore
and wanted out.  We haven't seen that type of trade in awhile in the grain
markets.  Funds were estimated to have sold about 10,000 contracts, but that
was muted because of the limit down conditions.  The volume was "only"
243,000 contracts, but like the fund activity, that was probably muted
because of the limit down conditions.

Overnight, corn opened lower to allow anybody that could get out yesterday a
chance to get out.  The December contracts traded about 3 lower overnight
before recovering and closing up about 4 cents.  The grain markets started
trading until 7:15 am CST instead of the 6 am closing for the night markets.
The outside markets were supportive, but I don't think the market is
watching the outside markets right now.  The large acreage number will shake
the markets for awhile, but it is probably the largest acreage number we
will see this year and there will be revisions, but the large number is now
the standard and depending on the yield, this large an acreage number could
shape corn prices for years to come and it isn't good for producers.  If the
86 mil acres last year put a glut of corn in the domestic and world markets,
what would 87 mil do and we have above trend line yields.  Before this
report, the market was worried about a larger yield, but I don't think
anybody was concerned about a large acreage number.  The corn market
probably recovers some today, but I think if they try and if the market gets
8-10 higher, it will be met with active selling.  There is nothing positive
in corn right now.  The bulls want to talk about a ridge forming in the 2nd
week of July that will bring hot/dry weather to the corn belt and possible
stress, but we will probably need to see an extended hot/dry period to bring
out extended buying.

eCBOT Overnight

Contract            Last      Net Change       High      Low      Volume

ZCN9                352^0    4^2                   352^4    345^0    1330

ZCU9                358^4    4^0                   360^0    351^4    4896

ZCZ9                 371^4    4^2                   372^6    364^2    14358

ZCH10              383^6    4^2                   384^4    377^2    387

Early Opening Calls: Corn 3-5c Higher

Top News

-- Traders say a 55,000 mt tender for US Corn by S Korea's major feed group
was passed on by the group.  The group deemed prices too high

-- On July 8th Japan will tender for 200,000 mt of feed Barley, acc. to Ag
Ministry official.  The tender will be under the SBS system.

-- The total grain output forecast made by a German farmers' coop pegs the
crop at 47.84 mln mt in 2009, up 800,000 mt from their prior forecast due in
large part to better weather.

-- Farmers' & exporters' union in the Ukraine expects 08/09 grain exports to
total 24.7 mln mt, well above last year's export restricted 4.2 mln mt.
This year's wheat exports are seen at 12.7 mln mt, barley 6.0 mln mt & Corn
at 5.5 mln mt

-- General Mills reported strong sales figures for their 4Q, sales rose 5%.
Those strong sales helped the 4Q net income rise to $358.8 vs. the year ago
quarter $185.2 mln net income

-- S African Corn farmers delivered 505,000 mt of White Corn to silos last
week, while delivering 328,000 mt of Yellow Corn

-- Survey, conducted by Reuters, of OPEC production says total cartel output
in June rose by 180,000 bpd to 4.2 mln bpd or about 72% compliance with the
cartel's production quota.  This would be the second month over month rise
in output

-- Dalian Jan Corn Futures up +3 Yuan to 1,626 Yuan. ($1=6.83 Yuan)

-- LIFFE Nov Corn up +1.25 euro to 139.25 euro/mt

-- eCBOT Corn Vol: 209,009; Pit Vol.: 22,785; Open Interest change: -15,250

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

-- Outside markets. Energy +1.43 to 71.32; Gold & Silver: +10.9 to 938.3; US
$ Slightly better than the yen and weaker than the Euro

Cash Markets

-- CIF Corn steady up 2.  June +43U to +46U, July +44 to +46, Aug. +52 to
+54,  Sept. +58 to +61, Oct. +49 to +51, Nov.

+50 to +52, Dec. +52 to +57, Jan. +42 to +??

TREND:

Lot of trade wanting to see wheat gain on corn as a seasonal---yes it did
today. However, wheat still has a problem with world inventory remaining
somewhat burdensome and US exports not very competitive. Small gains vs.
corn is all we see with the potential of the wheat corn spreads moving back
to test the lows again. Do not get enamored with the wheat bounce that is so
well overdue. Sell into it

Limit down in corn all day. Consumptive interest seems pretty active
overnight so do not be surprised if we rally some. The resistance will be
tough 10 cents higher. Test of the Dec lows certainly a potential. This is
3.25 in CN and 3.50 in CZ. It is not out of the question that those lows in
CZ come out for a moment?



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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