The corn market continued to move lower as weather conditions remain almost perfect and the sell off in soybeans helped pull the corn market down. The corn market lost 80 cents last week and is now back at the June level giving back all the July gains after the flooding we saw across the western corn belt. The September and December corn both closed over 21 cents lower down near the lows of the day. The speculation is that the corn conditions have improved so much, traders now want to talk about trend line yields when just a couple of weeks ago, the talk was 5-7 bu below trend line yields. The weather conditions continue to be almost perfect with warm weather and timely rains across most of the central Midwest. There are some areas to the south and north that are getting dry, but for the most part, the main growing areas are in excellent condition. The outside markets also helped push the grain markets lower with crude oil closing lower again on Friday. The volume was moderate at around 260,000 contracts and funds were net sellers of another 8,000+ contracts.

Overnight, the corn market continued to go lower as there really isn’t many traders that are going to step out and buy corn right now. The December was down another 13-14 cents last night, but closed down 3-4. Some traders/analysts think that corn might have some value down here in the $6.00 area in the cash market and we could see a bounce. I don’t know, but I would expect to see some selling pressure on any attempt to rally the corn market. We have seen the corn market get 2-4 higher and immediately finding sellers. Outside markets today are a mixed bag with crude oil trading up $2 earlier, but now just barely higher. The Argentine President officially repealed the tax on soy exports, so that should open their markets and put more pressure on the soybean market and thus the rest of the grain markets. I would expect the corn market to find a trading range unless there is new news that comes out, but it probably stays in a trading range until we get another crop report in the beginning of August. The corn market should open lower and then look for direction. The soybeans could be the leader right now in the grain complex and another big down day in soybeans will drag down the corn market.

Globex Overnight

Contract Last Net Change High Low Volume

ZCU8 606^0 -3^4 609^2 596^0 2606 ZCZ8 625^0 -3^4 628^2 615^0 13629 ZCH9 643^6 -4^0 647^2 635^0 2257 ZCK9 655^2 -4^4 655^2 648^4 7 ZCN9 663^2 -3^6 663^4 654^6 220

Early Opening Calls: down 2-4c

Top News

-- India's exports of corn in the marketing year ending Sept 2008 are expected to total 1.5 mln mt, up from 2007's 500,000 mt -- Philippines gov't will offer domestic rice paddy farmers subsidies on fertilizer in a bid to help boost production. -- To help spur further negotiations at this week's WTO talks, EU's trade delegation say they've proposed cutting import tariffs on farm produce to 60% from 54% -- The CFTC said Friday that certain non-commercials will be reclassified as commercials this week. -- The Dalian corn contract for Jan 09 fell 14 Yuan to settle at 1,885 Yuan. -- eCBOT Corn Vol. 219,877 ; Pit Vol. 31,819 ; Open Interest change: + 4,641 -- Weather: 6-10 Day Forecast: Above Normal Temps. Normal to Below Precip. The Corn Belt will see chances of scattered showers and thunderstorms almost each day this week with the best coverage and amounts favoring northern and western areas. Temps near normal. -- Outside markets. Energy +2.43 at $131.31; Gold & Silver: +8.4 at $965.9 and +0.296 at $18.506; US $ trading down vs. Euro but better against the yen.

Cash Markets

CIF Corn steady up 2. July +25 to +28, Aug. +30 to +31, Sept. +38 to +40,Oct. +30 to +32, Nov. +33 to +36, Dec. +38 to +40, Jan. +32 to +34

TREND:

Both beans and corn are well down into levels that I saw as value. Hard to stand in there and buy the market when there is so much negative chart action along with the talk of higher corn yields.

Ethanol is a very small contract without much trade---but it has led the energy market down this week off 37 cents. This is worth 110 in corn?

Fundamental outlook for beans cannot turn negative. Yields will be much below trend line and the demand does not appear to be as cut back as in corn? All we do with the lower prices is encourage more consumption and prevent the major expansion in So Amer acres needed?

Wheat has been resilient and not able to move into new lows. It is difficult for me to identify support levels here after corn and beans fell through the levels I thought would hold---but a stab into new lows under 7.50 would be a very negative wheat trade

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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