The corn market continued the sell off on Monday that began 2 weeks ago when the USDA report showed that demand for corn was cut back in May BEFORE we had the run up in prices in June. The September and December contracts were both down over 20 cents on Monday, off the lows, but still significantly lower, following beans. As one veteran trader/analyst said yesterday, timing is everything. The corn market ran up to new all time highs back in June because of rain and flooding and now we have sold off because of rain, rain, and more rain. The weather is the main reason for the recent sell off and probably over-exaggerated prices. The outside markets have backed off as well with crude oil well off the highs and beans selling off as well. Even with everything else, weather is biggest bearish factor affecting corn prices today as the warm temps and frequent rain is making almost ideal growing conditions across most of the Midwest. Volume was a little bigger than what we had been seeing the last 2 weeks with almost 300,000 contracts trading with funds selling another 7,000 contracts. There is very little new news out on the grains right now, so weather is dominating.

Overnight, the corn market closed higher. WOW, I haven’t been able to say that in what seems like a long time, even though corn was only up 1-2 cents this morning. The whole market seems to be short corn right now, and everybody keeps looking for some bounce, but it hasn’t happened, or if it has, it was quickly sold. Last night after the close, the USDA released crop conditions and as expected, it was a little better than last week in good/excellent category and the poor/very poor category got a little smaller(better). See the actual numbers below. Silking was way behind, but that was expected with the corn getting planted late. These numbers will probably be forgotten after the night session as there was very little surprise and numbers were what the market was expecting. The corn market will probably be a follower today as the bean market tries to rally off the lows that were made yesterday. The bottom line is both corn and beans will probably find willing sellers on an attempt to rally as the weather remains excellent and there is nothing on the long term forecast that shows any change. The corn market has dropped so far, so fast, it is due a technical correction and profit taking, but it probably can’t be sustained unless there is new bullish news that comes to light. The corn market is expected to open this morning 1-2 higher, following a bean call of 10-15 higher. Until or unless the weather picture changes, corn will have a hard time sustaining any rally.

Globex Overnight

Contract Last Net Change High Low Volume

ZCU8 590^6 1^4 594^0 589^0 1642 ZCZ8 609^4 1^2 613^0 608^2 3920 ZCH9 629^0 1^2 632^0 627^6 308 ZCK9 641^4 1^4 644^0 640^0 50 ZCN9 650^4 2^2 652^0 648^0 75

Early Opening Calls: up 1-3c

Top News

-- Total Corn imports by S Korea in the Jan-Jun period rose 13.8% vs. same period last year, acc. to Korea Int'l Trade Assoc. Feed Corn imports in the FH 2008 were 4.2 mln mt up 19% from yr ago. However food Corn imports fell 7.2% -- Chinese Corn imports, acc. to customs data, shows in the FH 2008 imports rising 26% from year ago levels to 8.54 mln mt -- Good rains lead analysts to increase their expectations of S Africa's Corn 07/08 crop to 11.70 mln up from the prior estimate of 11.59 mln mt -- Monday's USDA Corn Export Inspections: 29.843 mln bu; expected 30.5 mln bu. -- USDA weekly progress report showed corn silking 34% up 21% points from last week but well behind year ago pace of 72% & the 5 yr avg of 60%. Corn conditions shifted slightly: vp-poor category 10% vs. prior week's 10%, fair category 25% vs. 26% last week & combined good-ex categories were 65% vs. 64% last week. -- Chief US WTO negotiator says US has will to cut farm subsidies to $15 Bln, but says that offer must be met by others opening their markets & need assurances no legal action will be taken later to further cut subsidies -- Argentina's Ag Sec. likely to step down acc. to reports from local newspapers. -- Corn futures on the Dalian Exchange were lower, most active Jan contract fell 5 to 1,880 Yuan/mt -- eCBOT Corn Vol. 263,010; Pit Vol. 22,639 ; Open Interest change: - 9,995 -- Weather: 6-10 Day Forecast: Below Temps East, Normal to Above West. Below Precip East, Above West. The Corn Belt will see chances of widely scattered showers and thunderstorms today into Saturday. Rainfall amounts look to be a trace to 1.00 Temps near normal. -- Outside markets: Energy complex + 0.01 at $131.05; Gold & Silver: +9.0 at $973.1 and +0.236 at $18.664 ; US $ trading down vs. Euro and Yen.

Cash Markets

-- CIF Corn steady off 2 . July +24 to +26, Aug. +28 to +30, Sept. +37 to +40,Oct. +30 to +33, Nov. +33 to +37, Dec. +37 to +40, Jan. +32 to +34

TREND:

The wheat market just refuses to take part in the extremely weak corn and bean trade. Some short covering could be the reason. European crop continues to get larger but the FSU crops have had a little to much rain and could lose some quality but not sure that is supporting this market either---just too many people already short. One customer said today that the Index funds had bot up all the wheat liquidity and I am starting to believe it. Chart is still bearish but on its own. Those corn and bean spreads against wheat have lost too much for the trade to be resurrected for more than a correction?

Corn is very close to rolling over on the long term charts. I think the market is very over sold and is due a bounce but there will be a lot of selling into that rally when it comes. Needs to hold today’s lows if we are to get more than 15 to 20 cent rally back.

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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