The corn market was limit down yesterday and it didn’t have anything to do with the outside markets. The USDA shocked the market with a huge acreage number beating all estimates and pushing corn through the March lows. Corn traded in the opening minute but then went limit down for the rest of the day. The July contract which has no limits because it is in delivery, traded about 35 lower at one point during the day. The limits will be expanded today to 45 cents. The trade was looking for around 84 mil acres and the USDA report estimated acres at 87 mil which was 3 mil from the average estimate and 1 mil more than the highest estimate. Many traders felt that this acreage number is too big and there is no way we will have that many acres planted when the final acreage numbers are released later this year, but it doesn’t matter as the market is trading the USDA number they released today. We saw fund liquidation and the “get me out at any cost” trading happening yesterday as traders just couldn’t take it anymore and wanted out. We haven’t seen that type of trade in awhile in the grain markets. Funds were estimated to have sold about 10,000 contracts, but that was muted because of the limit down conditions. The volume was “only” 243,000 contracts, but like the fund activity, that was probably muted because of the limit down conditions.

Overnight, corn opened lower to allow anybody that could get out yesterday a chance to get out. The December contracts traded about 3 lower overnight before recovering and closing up about 4 cents. The grain markets started trading until 7:15 am CST instead of the 6 am closing for the night markets. The outside markets were supportive, but I don’t think the market is watching the outside markets right now. The large acreage number will shake the markets for awhile, but it is probably the largest acreage number we will see this year and there will be revisions, but the large number is now the standard and depending on the yield, this large an acreage number could shape corn prices for years to come and it isn’t good for producers. If the 86 mil acres last year put a glut of corn in the domestic and world markets, what would 87 mil do and we have above trend line yields. Before this report, the market was worried about a larger yield, but I don’t think anybody was concerned about a large acreage number. The corn market probably recovers some today, but I think if they try and if the market gets 8-10 higher, it will be met with active selling. There is nothing positive in corn right now. The bulls want to talk about a ridge forming in the 2nd week of July that will bring hot/dry weather to the corn belt and possible stress, but we will probably need to see an extended hot/dry period to bring out extended buying.

eCBOT Overnight

Contract Last Net Change High Low Volume

ZCN9 352^0 4^2 352^4 345^0 1330 ZCU9 358^4 4^0 360^0 351^4 4896 ZCZ9 371^4 4^2 372^6 364^2 14358 ZCH10 383^6 4^2 384^4 377^2 387

Early Opening Calls: Corn 3-5c Higher

Top News

-- Traders say a 55,000 mt tender for US Corn by S Korea's major feed group was passed on by the group. The group deemed prices too high -- On July 8th Japan will tender for 200,000 mt of feed Barley, acc. to Ag Ministry official. The tender will be under the SBS system. -- The total grain output forecast made by a German farmers' coop pegs the crop at 47.84 mln mt in 2009, up 800,000 mt from their prior forecast due in large part to better weather. -- Farmers' & exporters' union in the Ukraine expects 08/09 grain exports to total 24.7 mln mt, well above last year's export restricted 4.2 mln mt. This year's wheat exports are seen at 12.7 mln mt, barley 6.0 mln mt & Corn at 5.5 mln mt -- General Mills reported strong sales figures for their 4Q, sales rose 5%. Those strong sales helped the 4Q net income rise to $358.8 vs. the year ago quarter $185.2 mln net income -- S African Corn farmers delivered 505,000 mt of White Corn to silos last week, while delivering 328,000 mt of Yellow Corn -- Survey, conducted by Reuters, of OPEC production says total cartel output in June rose by 180,000 bpd to 4.2 mln bpd or about 72% compliance with the cartel's production quota. This would be the second month over month rise in output -- Dalian Jan Corn Futures up +3 Yuan to 1,626 Yuan. ($1=6.83 Yuan) -- LIFFE Nov Corn up +1.25 euro to 139.25 euro/mt -- eCBOT Corn Vol: 209,009; Pit Vol.: 22,785; Open Interest change: -15,250 -- Weather: 6-10 Day Forecast: Normal Temps. Normal to Above Precip. -- Outside markets. Energy +1.43 to 71.32; Gold & Silver: +10.9 to 938.3; US $ Slightly better than the yen and weaker than the Euro

Cash Markets

-- CIF Corn steady up 2. June +43U to +46U, July +44 to +46, Aug. +52 to +54, Sept. +58 to +61, Oct. +49 to +51, Nov. +50 to +52, Dec. +52 to +57, Jan. +42 to +??

TREND:

Lot of trade wanting to see wheat gain on corn as a seasonal---yes it did today. However, wheat still has a problem with world inventory remaining somewhat burdensome and US exports not very competitive. Small gains vs. corn is all we see with the potential of the wheat corn spreads moving back to test the lows again. Do not get enamored with the wheat bounce that is so well overdue. Sell into it

Limit down in corn all day. Consumptive interest seems pretty active overnight so do not be surprised if we rally some. The resistance will be tough 10 cents higher. Test of the Dec lows certainly a potential. This is 3.25 in CN and 3.50 in CZ. It is not out of the question that those lows in CZ come out for a moment?

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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