Linn Group Morning Corn Comment

CHICAGO - Jun 14/12 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market was mixed on Wednesday with most of the trade being driven by the bull spreading which was very aggressive.  The July contract closed up about 8 cents while the Sep/Dec closed down about 11-12 cents.  The bull spread started early in the day session and was strong all day with the July trading as much as almost 20 higher at one point.  The corn market was quiet overnight but it sold off into the morning hours and the new crop was under pressure all day, moving higher only on the strength of the July contract and bull spreading.  The corn market did try and rally near the end of the day, but in the final 15 minutes, the selling was aggressive and took most months down into new lows.  The weather remains the same with rain restricted over the heart of the ECB and there doesn’t seem to be much on the horizon except for some small areas.  There does look to be a better chance of rain next week, but it is going to be hot for the next 3-4 days and that is going to cause more stress.  The market doesn’t seem to care with old crop going lower.  Maybe the market is realizing that we are going to have enough acres to withstand a lower yield.  Remember, for all the trouble spots, we also have some spots that are doing great and corn isn’t made in June, it is made when it is pollinating.  The volume was big at 467,000, but most of that was spread trade.

Overnight, the corn market is higher on renewed talk of the dry weather reducing yields and traders squaring some positions ahead of another weekend.  The weekly export sales this morning were terrible and when you look at the lower export inspections on Monday, the market will start to wonder about demand. We have been saying for awhile that we could see a reduction in demand and even if we don’t have record yields, the bigger acres and reduction in demand will increase carryout that could hurt prices for years.  The outside markets have been largely ignored, but there is a big Greek vote on austerity measures this weekend and it could have a material effect on the EU and thus worldwide demand for commodities.  The corn market is higher today and it will be interesting to see how aggressive the bull spreading takes the July contract.  The Goldman Roll is over now, so the July contract will trade more like the cash market and we could see some aggressive moves higher.  The cash market has been very strong and we could see these two markets come together.

LaSalle Street News Top News

**USDA Corn 11/12 Export Sales Net: 92,100 mln mt; 12/13 Net: 77,700 mln mt; expected 375k-700k mt

-- Grain traders say 55,000 mt of optional origin food grade Corn was bought by S Korean corn  processing group on Thursday.  The grain is for arrival by Nov 5th and Mitsubishi reportedly sold the grain at $260/mt cif

-- India's Farm Ministry say they've raised the support price for Corn to 1,175 Rupees from last year's 980 Rupees

-- ICE announced the close of trading and settlement time for all ICE Futures Canada futures and options products will change to 2:00 pm CDT, from 1:15 pm CDT for the following products: Canola, Barley, Durum Wheat, Milling Wheat & Western Barley - Effective, Monday, June 25

-- USDA broiler data for week ending June 9th, shows 199 mln chicks were hatched, down -3.0% from the yr ago week; broiler growers for the week were 167 mln chicks down -2.0% from the yr ago week

-- CEO of Tereos Brazilian division said they're raising between €100-145 mln to increase their stock float on the Sao Paulo exchange and will use those proceeds to fund new wheat starch project in China, a corn starch facility in Brazil and convert an ethanol plant in France to multi input use

-- Pending Tender:  June 12th is tender bid deadline in a 100,000 mt optional origin Barley tender floated by Jordan on Monday, shipment is expected between LH Aug to FH Oct, acc. to cash grain traders

-- January corn futures on the Dalian Exchange lost 8 yuan to 2,287 yuan/mt

-- CBOT Corn Volume & Open Interest for June 13th 2012 was 467,168; Open interest decreased -1,585 to 1,155,927.

-- CBOT Ethanol Volume & Open Interest for June 13th 2012 was 2,260; Open Interest decreased -92 to 11,204.

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

-- Outside markets. Crude Oil off -5c @ $82.57; Gold up +$1.50 @ $1620.90; Silver off -15c @ $28.78; US $ index up 15 pts @ 82.10

LaSalle Street News Cash Markets

-- CIF Corn up 1 to 6.  June +89 to +??, LH June +89 to +??, FH July +89 to +91, July +68 to +72, Aug. +105 to +110, Sept. +68 to +71, O/N +64 to +68

TREND:

It is really unusual that Jly corn was able to rally 20 cents and it did nothing to firm Dec. Huge spread trade? Disappointing reaction to reduced crops---maybe the fund trade does not believe it yet? Contacts in the country are important? Growing negative sentiment about corn will still be in the way of any rally? Still see little reason for CZ to drop below 5.00. End of the Goldman roll will leave the short in CN at risk. Not who will sell into the buying for the balance of the week. There was a lot of trade in the N/Z CSO 100 calls at 9 to 9.5 cents. Even the 120 calls traded to 5 cents.

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Jim Riley
Linn Group
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