Linn Group Morning Corn Comment

CHICAGO - Jul 8/09 - SNS -- Following is the morning corn futures comment from the futures commission brokerage firm Linn Group.

The corn market closed down on the lows down about 9 cents after holding up
well most of the day.  The corn market traded higher most of the day even
with the soybeans trading sharply lower, trading limit down at one point and
closing just a few cents off limit down.  There was some talk that corn was
being held higher by spreading long corn against soybeans 2x1, but flat
price finally gave it up as the rebound off the lows in soybeans gave it up
again in the final 15 min of the day.  Corn has given up almost 25% from the
highs and it seems like the December contract has its sights on the $3.00
level.  The weather picture still remains very bearish with much of the corn
belt receiving excellent weather conditions with periodic rains and average
temps with the prospect of hot/dry conditions not on the horizon.  The hot
weather forecast for next week isn’t expected to last long and may actually
be beneficial because some of the northern areas are still in the need of
“heat days”.  The outside markets were also negative with the US$ higher and
crude oil down over another $1.  The crop condition report released on
Monday was looked at as a little friendly because we didn’t see an
improvement from the previous week, but it was still a lot better than it
was a year ago.  We had very big volume yesterday at over 400,000 contracts,
but a lot of that was spreading and funds were net sellers of about 10,000+
contracts.

Overnight, the corn market closed about unchanged near the lows of the night
session, but the trading range was only about 4 cents, so relatively quiet.
In comparison to the previous night session the December contract traded
25,000 contracts vs. 3900 last night.  There isn’t much to talk about for
corn right now except we may start to see some position squaring ahead of
the USDA report on Friday which is expected to show a bigger old crop
carryout number and an increase in the expected yield.  Typically, the USDA
adjusts the yield in the July crop production report and may change the
stock numbers to better reflect a drop in feed needs.  As we have been
saying, any rally in corn will be sold and we saw that yesterday as a brief
rally in the middle of the day led by the July contract quickly evaporated
and corn actually sold off to make new lows.  I would expect to see some
position squaring into the report on Friday, but the market is expecting a
bearish report on usage and on an increase in yield, so I don’t know if many
traders are going to liquidate short positions until after the report on
Friday morning.  Corn will be called unchanged, but watch the outside
markets and soybeans for indications.

eCBOT Overnight

Contract            Last      Net Change       High      Low      Volume

ZCN9                339^0    3^4                   340^0    336^6    35

ZCU9                327^4    2^0                   330^0    326^0    1688

ZCZ9                 337^0    1^2                   339^0    336^0    3557

ZCH10              351^4    2^4                   351^6    348^4    401

Early Opening Calls: Corn Steady to 3c Higher

Top News

**USDA switched 120,000 mt of US corn private sale previously categorized to
an Unknown destination to S Korea for the 08/09 MY

-- For Friday's USDA Corn ending stocks figures, analysts expect 08/09 Corn
stocks at 1.70 bln bu up from June's 1.60, while the 09/10 Corn stocks are
expected to come in at 1.57 bln bu vs. June's report of 1.09 bln bu

-- For Friday's USDA Soybean ending stocks figures, analysts expect 08/09
Soybean stocks at 107 mln bu down from June's 110, while the 09/10 Soybean
stocks are expected to come in at 229 mln bu vs. June's report of 210 mln
bu.

-- China's Nat'l Grain & Oilseed center left the country's Corn & Soybean
production figures unchanged.  Corn production is expected at 163 mln mt,
while Soybean production is 15 mln mt.  The group however did lift 2009
Wheat output to 113.2 mln mt up 0.7% from the prior

-- At today's Japanese SBS tender, 22,000 mt of food grade Barley was
purchased, acc. to Ag Ministry officials

-- US CFTC Chmn says hearings will be held this summer to determine whether
commodities of "finite supply" will be subject to rules to curb excessive
speculation such as position limits.  They'll also review whether to change
Commitment of Traders' report to better reflect all classes of traders

-- US seeks multiyear, multi billion US $ food production aid from G8
members for developing countries.  Programs would include money to finance
ag infrastructure & ag development strategies in those developing nations

-- EU finance ministers accept proposal put forth by the European Commission
imposing import duties of ˆ23 to ˆ41 per mt on US biodiesel beginning July
12

-- Dalian Jan Corn futures down -8 Yuan to 1,604 Yuan. ($1=6.83 Yuan)

-- LIFFE Nov Corn Futures down -0.25 euro to 137.75 euro/mt

-- eCBOT Corn Vol: 385,165; Pit Vol.: 22,710; Open Interest change: -17,156

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

-- Outside markets. Energy down -1.03 to 61.90; Gold & Silver: -11.5 to
917.6; US $ Slightly better than the euro and down against the yen

Cash Markets

-- CIF Corn steady off 1.  July +54 to +57, LH July +56 to +??, Aug. +57 to
+60,  Sept. +58 to +62, Oct. +50 to +52,

Nov. +51 to +55, Dec. +53 to +58, Jan. +43 to +47

TREND:

Corn held together well for most of the day---assumed to be tied to
corn-bean spreading.  It was not until late in the day when flat price corn
finally lost the spread trade vs. beans and broke sharply into the close.
The strange influence of the expiring July contract on the carries needs to
be addressed. Only 8 thou CN remained open to start the day---appears some
commercials have stayed with short hedges too long and the lack of sell
orders in the spreads and flat price has allowed the N/Z spread to move 30
cents in 4 days. This spread topped out today at 9 cent inverse and
corrected into the close. The squeeze could be over or not---but the
influence caused short hedgers that stopped in the Sep to run to cover those
spreads also. Hard to squeeze Sep corn so time to roll any short hedges back
from the Dec if you can.

The new low close on all corn contracts has all the signs of moving this
market for a harder test of 3.00. Stay tuned. May play catch up with beans
tomorrow.



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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