Corn hits 7-week high as USDA surprises with crop yield cut

CHICAGO: US corn futures jumped more than 1 percent to a seven-week high on Thursday after the U.S. Department of Agriculture (USDA) unexpectedly cut its yield forecast for the 2018 crop, leaving stocks of the grain lower than anticipated.

Soybean futures followed corn higher, reversing earlier losses as the government's harvest outlook fell short of the average trade estimate, while wheat prices declined.

In its monthly supply-and-demand report, the USDA raised its corn crop forecast by less than expected to 14.778 billion bushels. The average yield was trimmed to 180.7 bushels per acre, which surprised traders that had been expecting an increase.

"The corn yield was the biggest surprise and it caught traders off guard," said Terry Reilly, senior commodities analyst with Futures International.

Although supplies of corn remain abundant, the unanticipated yield cut set the stage for further reductions as the market has already been on edge about excessive rains across the Midwest this week that have delayed harvesting.

"The reality of the heavy rains over the past few weeks, coupled with the surprise in the yield, confirms that USDA may even take the yields down further from where they put them today," Reilly said.

The USDA pegged soybean production at 4.690 billion bushels, with yields averaging a record 53.1 bushels per acre. Both of those forecasts were also below trade forecasts.

Chicago Board of Trade December corn rose 6-1/4 cents to $3.69 a bushel by 12:57 a.m. CDT (1757 GMT), reversing losses in the three previous sessions. The contract broke through chart resistance at its 50-day moving average and hit its highest level since Aug. 22.

November soybeans gained 5 cents to $8.57-1/4 a bushel after touching a 1-1/2 week low before the USDA report.

Soybean traders remain wary of escalating trade tensions between the United States and top importer China.

U.S. President Donald Trump warned on Thursday there was much more he could do to hurt China's economy, as he showed no signs of backing off an escalating trade war with Beijing.

CBOT December wheat fell 3-1/4 cents to $5.07-1/4 a bushel, a 1-1/2 week low.

Russia, the world's top wheat exporter, will inspect grain loading at ports because of complaints about crop standards, the head of the country's agriculture safety watchdog said Thursday.

Traders have been watching for changes in Russian wheat regulations because they have been used as informal curbs on exports in the past.