Linn Group Morning Soybean Comment

CHICAGO - Feb 5/10 - SNS -- Following is the morning soybean futures comment from the futures commission brokerage firm Linn Group.

The soybeans closed higher on Thursday after receiving some late day buying
on short covering after making new lows early in the session and couldn't
find any follow through.  The March contract closed up about 6 cents and the
November was up about 3 cents with oil and meal also higher closing near the
highs of the day.  The outside markets were very negative and the grains
actually held up pretty well.  There were rumors around yesterday that a
huge fund blew up and that was the cause for the big sell off in energies
and metals.  The soybeans did make new lows for the move yesterday early in
the session but seemed to hold the psychological $9.00 level and rally to
close strong.  The fundamentals remain tough for soybeans with because of
the harvest that is beginning in Brazil and will continue for the next
couple of months.  While the demand for soybeans remains good, So. America
will get most of the attention in the coming months.  The products were also
strong lead by bean oil early in the session and meal later in the session.
The report about Bio-diesel on Wednesday afternoon added support for bean
oil.  The current stocks should be enough to meet the mandates, but there
could be shortages next year.  The volume remains good at 178,000 contracts
and funds were buyers of 2,000 contracts.

Overnight, corn was able to hold some gains even as the outside market
remain negative and the rest of the grain complex sold off.  The March and
November contracts closed up about 3-4 cents near the highs of the session
and about 7-8 cents off the lows.  Not much new news this morning expect for
macro unemployment numbers which will be called as positive as the numbers
were ok and the unemployment rate was revised to down 9.7% from 10.1%.  We
are probably still seeing some short covering in the soybeans and that is
lending support.  Also, remember that soybeans have a story with good
demand, it is just the huge production coming out of So. America that will
put pressure on the soy complex.  We also get world production numbers and
supply/demand next Tuesday which could see some profit taking the next
couple of days.  Soybeans will be called higher this morning, probably 3-5
higher as the outside markets have become much less negative than when the
grains closed, but I would still expect to see selling pressure on any
rally, just like we saw after the rally on Monday and Tuesday.

Globex Overnight

Contract            Last      Net Change       High      Low      Volume

ZSH10              917^0    3^0                   919^2    910^0    5937

ZSK10              927^4    2^6                   930^0    921^0    2023

ZSN10              936^2    2^6                   938^6    929^6    2679

ZSQ10              932^2    2^2                   932^2    929^2    21

ZMH10              272.1    0.9                    272.9    270.1    1234

ZMK10              264.9    0.7                    266.0    263.0    977

ZMN10              264.7    1.0                    265.4    262.3    751

ZLH10               37.16    -0.05                 37.25    36.93    3711

ZLK10               37.61    -0.07                 37.69    37.40    2292

ZLN10               38.08    -0.05                 38.15    37.85    1136

Early Opening Calls: 1-2 cents better

Top News

**Stats Canada: Dec 31 Canola Stocks: 8.8  mln mt vs. yr ago 9.2 mln mt

-- Feb 9th is tender deadline for selling 12,000 mt of RBD palm olein to
India's state run PEC, acc. to the company.  Delivery is for last week of
March 2010

-- Buenos Aires Grain Exchange raises 09/10 Argentine Soybean production to
52 mln mt, up 1 mln mt from last week's figure

-- Buenos Aires Grain Exchange leaves 09/10 Argentine Corn production at
18.4 mln mt, unchanged from last week

-- Early poll of grain analysts for next Tuesday's USDA crop data, shows
09/10 Corn ending stocks at 1.73 mln bu down from January's 1.764 mln.

-- Early poll of grain analysts for next Tuesday's USDA crop data, shows
09/10 Soybean ending stocks at 216 mln bu down from January's 245 mln.

-- Russia's Ag Ministry reports total planted Grain area for 2010 at 77.9
mln ha, up 395,000 ha over the prior season

-- Pilgram Pride CEO in analyst call says the newly emerged company from
bankruptcy will not close additional plants and considering reopening an
idled plant to supply new customers, & in spite of ongoing Russian US
poultry import ban.

-- Possible Tender: Malaysia crusher, acc. to company official are looking
to purchase 80,000 mt of US Soybeans for delivery in late March to early
April

-- Possible Tender: Traders report that up to 110,000 mt of Latam soymeal is
being sought for delivery in March/April by feed mills in Indonesia

-- Sep soyoil futures on the Dalian exchange gained 18 pts to 7,268 yuan/mt
on Friday, Sep palm oil futures also were higher, up 14 to 6,662 yuan/mt

-- Dalian soybean futures on Friday gained 35 yuan to settle at 3,777
yuan/mt, while soymeal futures for Sep delivery added 12 to end the session
at 2,724 yuan/mt

-- April palm oil futures rose 11 ringgit to 2,521 ringgit/mt on the
Malaysia Bursa

-- Liffe May rapeseed futures were unchanged at 287.75 euros/mt.

-- Globex Soybean Vol. 156,533; Pit Vol. 13,483; Open Interest Change: -
3,351

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

-- Outside markets: Energy Complex +0.13 at $73.27; Gold & Silver: -1.8 at
$1061.2 & -0.095 at $15.255; US $ +0.140 at $80.215

Cash Markets

-- CIF Soybeans steady up 5:  FH Feb. +64 to +70, Feb. +57 to +60, Mar. +45
to +55, April +40 to +47, May +40 to +47, June +43 to +50, July +45 to +50,
Oct. +42 to +46

TREND:

The talk of active redemptions from index funds and ETF's does not come as
any surprise. These instruments have had a phenomenal growth and some of the
new investors are not the typical big money looking for an offset to cushion
moves in equities. A good number of the new investors will not set through a
draw down in equity in these investments.

As for the grains today, they were certainly tugged a lot of different
directions. It is hard to respond to the positive inputs in biofuels when
crude oil and gold are in a very fast retreat. Those charts are shown below.
Grains were already down close to major support levels and may have to spend
some time correcting over sold conditions before we can push into new lows.

On Tuesday it was an outside day up. Oh-my shorts were scared. Big sigh of
relief on Wednesday when the market reversed back down. Another reversal
back up today? Says choppy is a hint at change in trend. Be careful here.
Testing the targets of 9.00 to 8.90 and getting close. A settle over the
Wednesday high at 9.34 would say more of a short covering rally is in store?

Everyone wanted to look at oil/meal trade today based on the change in
biodiesel standing. Afraid this trade has already moved a lot with strong
suggestion that the trade involved knew the change was coming.

Still see soy oil gaining on meal. Find a way to trade it on a small
correction. Is really bearish cash meal for later this year.

The markets still have a very strong fundamental problem with the harvest in
the So Amer crops getting closer to reality. Quality issues in the US corn
and bean crops will have buyers making the swap as soon as economically
feasible. So rallies here will remain limited in scope.

USDA will release new world production est along with updated S&D's for the
world and US next Tues morning. That is a minor report but another reason to
anticipate some short covering prior to that report.

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To discuss this report further or for specific trade ideas please contact me
directly

Nathan T. Smith III
Linn Group
nsmith@linngroup.com
toll free: (877) 787-6278
local: (312) 896-2090
fax: (312) 896-2050
www.linngroup.com/

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