Linn Group Morning Corn Comment

CHICAGO - Nov 12/08 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market broke down into new lows on Tuesday before recovering some
of the losses in the last hour of trading.  The Chinese stimulus package
seems to be long forgotten as commodity markets took it on the chin again
and the corn market was no exception.  The December contract closed down
over 9 cents, but about 14 cents off the lows made early in the session.
The corn market made new lows and was able to gain momentum, but we saw
profit taking late in the day and the outside markets helped the grains
recover.  The grain markets are still being controlled by the outside
markets as we saw the crude oil market down again and the US$ a lot
stronger.  It is tough to understand the grain markets when the outside
markets carry so much influence, but that doesn't look like it is going to
end anytime soon.  The weather remains a positive for the corn market right
now, but it doesn't seem like the market cares because the corn will
eventually get harvested, even if there is some yield loss.  Traders said
that you can't ignore the technicals which had corn marking new lows, but
the recovery at the end of the day muted the sell off.  The bottom line is
that demand remains weak and until that changes, corn is going to have a lot
of trouble rallying.  The volume was pretty good at 285,000 contracts and
funds were net sellers of 7,000+ contracts.

Overnight, the corn market traded mixed, right in-line with the outside
markets and closed slightly lower about the middle of the range overnight.
There is nothing really new to report on corn this morning as these markets
seem to not carry about any fundamental news.  The lack of demand and the
global recession is what is driving grain prices right now, nothing else.
What little fundamental news there is out there isn't driving grain prices.
For the last month or so, I have had crude and US$ quotes right in the
middle of my grain quote page.  There is little to indicate that demand for
corn will pick up anytime soon, especially with feed wheat a lot cheaper
than US corn. In addition, we saw Taiwan buy 55,000 mt of corn from Brazil
instead of the US after originally saying they would be buying one cargo
from the US and one cargo from Brazil.  China also announced they would be
lowering an export tax scheduled to take effect in December, which could put
them back in the export market.  Weaker export sales are weighing on the
market as freight rates have dropped huge since earlier in the year and just
when the market thought we would have a corn shortage next year, it looks
like there is plenty of corn to go around.  We continue to hear about
ethanol plants closing or going into bankruptcy and the VeraSun bankruptcy
is making farmers leery about contracting corn to them.  The corn market
should open lower than the overnight closes as the crude oil market is now
down over $2 which is lower than where it was when the grains closed at 6am.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZCZ8                 373^2    -1^0                  378^2    368^4    5505

ZCH9                391^0    -0^6                  395^4    386^0    851

ZCK9                398^0    -5^6                  406^6    398^0    52

ZCN9                410^4    -4^4                  418^0    409^0    142

Early Opening Calls: off 2-3 cents

Top News

-- Traders say Glencore sold 55,000 mt of Brazilian Corn to Taiwan feed mill
group Wednesday.  The miller group had been seeking 2 cargos, one from S
American & the other of US origin, but decided on a single S American origin
cargo instead.

-- Some talk among analysts & traders that rising Corn stockpiles along with
weak domestic demand might make China's gov't consider Corn exports to help
buoy local prices as part of the gov't plans to continue buying output from
Chinese farmers.  However, some analysts say low freight rates will keep US
grains competitive to other Asian nations.

-- China's gov't announced in effort to stimulate exports, it will begin
relaxing export tariffs on grains, some steel & some chemical products, but
did not give details on proposed exports tax relief.

-- China's Nat'l Grain and Oils agency left its Corn production estimate
unchanged at a record 156.0 mmt.

-- Better than expected Corn yields spur French gov't crop agency to
increase its 2008 Corn crop to 15.42 mln mt up from the prior 14.3 mln mt
forecast, and raised ending stocks to 3.04 mln, an increase of 0.857 mln mt
from last year's ending stocks.

-- Barge freight along the Mississippi on Tuesday fell again with STL
freight trading off 100 to 125% from Monday, as record rates were set last
week.

-- Ethanol industry execs say the US gov't should set higher blending rates
than the current 10%, suggesting 15% or 20% would be more appropriate to
meet federal targets of renewable fuel use.  The head of Poet ethanol said
the industry would work with the EPA & the incoming administration.

-- Energy demand worldwide is expected to have average growth of 1.6%
between now & the year 2030, acc. to monthly Int'l Energy Agency.  The group
said to keep pace with demand & avoid a supply squeeze, massive energy
infrastructure investment is needed. They further say halting new projects
in light of the current credit crisis would squeeze supply in the near
future & retard economic recovery in the near to medium term.

-- May Dalian corn futures were off 11 Yuan at 1,604 Yuan/mt.($1 = 6.83
Yuan)

-- Liffe Jan corn futures were off 1 euro at 129 euros/mt.

-- Globex Corn Vol: 245,052; Pit Vol.: 32,743; Open Interest change: - 1,086

-- Weather: 6-10 Day Forecast: Normal to Below Temps. Normal to Below
Precip. The Corn Belt will see light rain and snow today into Saturday.
Sunday looks dry. Temps normal to below.

-- Outside markets: Energy Complex -0.60 at $58.73; Gold & Silver: -5.5 at
$727.7 & -0.154 at $9.647; US $ is trading slightly better vs. Euro & is
lower vs. Yen.

Cash Markets

-- CIF Corn steady off 2. Nov. +46 to +47, Dec. +51 to +53, Jan. +42 to +44
Feb. +42 to +44, Mar. +42 to +44, Apr. +37 to +41

TREND:

Markets broke down on outside influences. Affected all grains. Wheat has
been the short leg in many inter-market spreads so did not have the selling
to hold it down.

Corn broke into new lows and made the trade that many users had been waiting
for. We encouraged no more than taking 90 days worth of coverage. Chart
still looks very negative with down side possible to near 3.35 to 3.25. I do
not see this without spending some time going sideways---but if you bot corn
today take a rally toward 4.00 and let someone else own it. One of the
problems for the ethanol margins today is that ethanol is trading well over
gasoline and the blender that was adding up to 10 cents to margins this
summer is now spending 15 cents more for ethanol and hurting profitability
compared to non-blended gas. Discretionary blending will come to a halt with
this relationship---not good for maintaining any sort of ethanol margins?



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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