The corn market rallied into new highs as traders are finally starting to get worried about planting delays and there is some talk of elevators covering farm hedges because of the high prices and the lack of bank financing. Corn closed 16-17 higher, only 2-3 cents off the highs. There seems to be a lot of corn planted over the last 5-7 days, but the rain started falling on Wednesday across most of the Midwest, stopping planting progress, and more rain events are forecast for next week. We are approaching the magic May 15th number and traders/farmers are starting to look at yield reductions on acres planted after this date. In addition to corn not getting planted, some of the corn already planted will have trouble because of the heavy rains and the cool weather forecast which won’t allow the planted corn to germinate and get out of the ground. Traders also were looking ahead to the supply/demand report to be released on Friday morning with most looking for a bullish report and wondering how the USDA can massage the numbers so corn isn’t at a negative carryout for 08/09. The USDA really has no idea on acres planted yet, so the big question will be if they are going to change the yield estimate with some traders looking for a decease from 155 to 151 in yield estimates. Volume was respectable at over 300,000 contracts and funds bot 3,000 contracts.

Overnight, the corn market continued the rally that started on Thursday during the day session with the July and December closing almost 9 cents higher. The USDA released the April supply/demand this morning and 07/08 carryout was estimated at 1.383 vs. 1.311 analyst estimate and 08/09 carryout was estimated at 763 vs. analyst estimate of 685. The USDA kept the acres the same but lowered yield to 153.9 from 155 estimate in March. They based this yield on 10 yr average of acres planted by the middle of May. Traders thought the USDA is too high on their yield estimate because of the expected acres planted by May 15th isn’t going to happen. The weather forecast continues to show rain and in talking to farmers today, most have had to stop planting corn by the rain or are planting in the mud. I talked to one farmer today that said he has had to drag planters out of fields, he isn’t happy about planting in the mud, but he has to get something in the ground because of insurance. The corn market was overnight and we expect the market to continue that trend today and open 5-10 higher, maybe higher. The big question is who is going step out and fade a corn rally right now with it raining in the Midwest, more rain this weekend, and another front expected the middle of next week. The market could rally today on a lack of selling as much as big buying. Exciting times, but also dangerous.

Globex Overnight

Contract Last Net Change High Low

ZCK8 627^0 8^2 627^0 617^4 ZCN8 639^0 8^6 639^0 628^4 ZCU8 648^0 8^2 648^0 638^0 ZCZ8 654^4 8^2 655^0 645^0 ZCH9 665^0 8^2 665^0 656^0

Early Opening Calls: steady, 5 cents better

Top News

**US May Corn 07/08 Carryout: 1.383 bln bu.; est. 1.31; Apr Rpt 1.238 **US May Corn 08/09 Carryout: 0.763 bln bu.; est. 0.69 **World 07/08 Corn Carryout: 109.69 mmt **World 08/09 Corn Carryout: 99.03 mmt **May China 08/09 Corn Output: 150.0 mmt **May China 07/08 Corn Output: 145 mmt; Apr Rpt 145.0 **May Argentina 08/09 Corn Output: 23.5 mmt **May S Africa 08/09 Corn Output: 11.5 mmt

-- US Sec. of Ag Schafer says proposed farm bill legislation has too much spending & doesn't adequately reform subsidies to farmers & Pres. Bush will likely veto the bill in its current form. -- CBOT May Corn Delivery: 517 -- Turkish media is reporting that its state grain board has said it will soon tender for import of 150,000 mt of Corn. -- May 8th is deadline set by Tunisia grain buying arm for a fresh 101,000 mt of optional origin Milling Wheat. They're also seeking 25,000 mt Barley with bid deadline on same date, acc. to traders -- 100,000 mt of barley tender was issued by Jordan's state grain buying arm on Monday, the bid deadline is May 20th. 50,000 mt are expected for LH June & the other 50k mt are expected in FH July -- January Dalian Corn futures rose 5 Yuan in overnight trade. They settled at 19,79 Yuan/mt -- Globex Corn Vol: 248,758; Pit Vol.: 42,639; Open Interest change: + 24,780 -- Weather: 6-10 Day Forecast: Below Normal Temps. Normal to Above Precip. The western Corn Belt will see some showers and thunderstorms today. Saturday is mostly dry. Sunday will see showers and thunderstorms west to east. Dry Monday. Temps below normal. -- Outside markets: Energy Complex +1.99 at $125.68; Gold & Silver: +4.1 at $886.0 & +0.137 at $16.933; US $ is slightly lower vs. Euro & is trading lower vs. Yen.

Cash Markets

CIF Corn off 1 to 3. May +?? to +20, June +23 to +26, July +33 to +35, Oct. +38 to +41, Nov. +39 to +43 Dec. +41 to +46

TREND:

The corn market broke into new contract highs today and held that trade into the close. Crop report in the AM. USDA has to be real creative to stretch corn supplies. The corn/wheat trade continued to work even after giving a chance to add to 20 cents higher during the day.

The surprise tomorrow may be the larger usage estimated for wheat

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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