The corn market consolidated yesterday some as it was probably oversold after the limit down day on Tuesday and we had fund buying yesterday as the index funds were prohibited from buying on the limit down day on Tuesday. The December contract closed up about 2 cents after making the highs early in the session and selling off in the middle of the day and then rallying on fund buying. The soybean market was strong on the opening and helped pull the corn market higher early in the session, but it just couldn’t the gains. The outside markets were supportive early with crude higher and the US$ lower, but crude faded later in the day with the corn market. With the corn market probably oversold after the limit down move, it was due for a bounce, but the upside is limited because of the much higher acreage number, the excellent weather conditions, and the weak domestic feed demand. There was also talk in the market that China would release corn from its reserves possibly next week to ease prices in the northern China as prices have gotten tight. The funds were net short on the day, but that was mostly because we saw significant index fund buying on the close as they couldn’t buy corn on Tuesday. The volume was strong at 320,000 contracts.

Overnight, corn traded mostly lower overnight closing down about 6 cents near the lows of the night session. There is nothing positive about corn right now and the market knows it and it will sell any rally until something changes. The weekly export sales this morning were good, but as we have seen, weekly export sales have gone largely ignored. There is no new news on the corn market right now, so traders/analysts will look at old information for trading guidance. Almost all the news is negative for corn right now as bulls hold on to the hope of weather stress later this summer during pollination will reduce yields. A producers worst nightmare is high yields on top of bigger acres. The 87 mil acres is probably too big, but it is now the base line for acreage discussions the rest of the summer and will probably go lower, but probably not 3-4 mil acres taking acres down to a reasonable number to keep prices higher. The weather is the main focus for traders now that the crop report is behind us. We have a 3 day weekend and we could see some further selling today as the weather pattern looks non threatening. Corn will be called lower this morning, the outside markets are negative, but if soybeans gain some strength, it could pull corn higher.

eCBOT Overnight

Contract Last Net Change High Low Volume

ZCN9 345^4 -6^2 352^4 345^2 308 ZCU9 350^0 -6^4 357^0 349^6 2698 ZCZ9 363^4 -5^6 369^6 362^4 5759 ZCH10 377^6 -4^6 383^0 376^4 455

Early Opening Calls: 3-4 lower

Top News

**USDA reports private sale of 152,400 mt of US Corn to unknown destination for the 09/10 MY **USDA Corn 08/09 Export Sales Net: 1.155 mln mt; 09/10 Net: 117,000 mt; expected 500-800k mt -- 55,000 mt of US Corn was sold to S Korea feed millers on Thursday for a reported price of $216.90/mt, acc. to merchandisers -- Buenos Aires Grain Exchange weekly report leaves the 08/09 Argentine Corn production figure at 12.5 mln mt unchanged from the prior reports -- Hungarian ag official says that country's corn crop is expected to be around the 8.5 mln mt mark -- Poultry industry group in the US said Chinese gov't has been sending signals that it will stop issuing import certificates for US poultry. The US group says its in retaliation for the US gov't denial to import Chinese poultry. China imported $372 mln worth of US chicken last year -- Ukraine Ag Ministry plans on buying in the first 3 months of its marketing year nearly 1.5 mln mt of grain. Their crop marketing year begins in July & has set aside $150 mln to make the purchases -- German based grain trading firm, Toepfer, says the country's 2009 grain harvest will be in a range of 46.5 to 47.5 mln mt down from last year's 50 mln mt haul. Its Wheat harvest is expected in a range of 24 to 25 mln mt -- Average daily volume during June at the CME Group was 11.4 mln contracts, but that figure is down 20% from the year ago month, total June volume was 251,000,000 contracts -- Dalian Jan Corn futures up +4 Yuan to 1,631 Yuan. ($1=6.83 Yuan) -- LIFFE Nov Corn futures Unch at 139 euro/mt -- eCBOT Corn Vol: 276,267; Pit Vol.: 39,595; Open Interest change: -1,008 -- Weather: 6-10 Day Forecast: Normal Temps. Normal to Above Precip. -- Outside markets: Energy complex -1.67 to 67.64; Gold & Silver -11.7 to 929.6; US $ Slightly stronger than the euro and weaker against the Yen

Cash Markets

-- CIF Corn steady. July +44 to +46, LH July +46 to +48, Aug. +50 to +53, Sept. +58 to +61, Oct. +49 to +51, Nov. +50 to +52, Dec. +52 to +57, Jan. +42 to +??

TREND:

Corn and wheat have definitely damaged the outlook---so let’s start from scratch.

Corn rallies will be limited. The down side may not be done. Weekly chart says we could take the market all the way to $3.00. Use weather related rallies to step up marketing for producers. Users have to do what is economical. Scaled down buying if needed---but should get lots of chances. New crop spreads will tend to remain under pressure but not sure that there is enough to be bear spread unless we get a correction due to weather?

If you have any questions, or if you would like to discuss specific trade recommendations on any markets, contact me directly.

Jim Riley Linn Group 877-787-6278 jriley@linngroup.com

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