Chicago | Reuters – U.S. corn futures plunged to contract lows on Thursday after the U.S. Department of Agriculture projected a bigger-than-expected 2017 U.S. harvest because of a record-large average yield that topped even the highest trade forecasts.

Soybeans also dropped as the USDA left its 2017 yield outlook unchanged despite widespread expectations for a cut.

In its monthly supply and demand report, the USDA raised its corn crop forecast to 14.578 billion bushels, based on an average yield of 175.4 bushels per acre, (BPA) which, if realized, would top a record set last year. The soy crop was seen at a record 4.425 billion bushels, on a yield of 49.5 bpa.

Chicago Board of Trade December corn ended down 6-3/4 cents, or 1.9 percent, at $3.41-1/2 a bushel after setting a contract low of $3.40-3/4. The March-through-September 2018 contracts and 2019’s March and May contracts also posted new lows.

An already large net short position held by non-commercial traders, a group that includes hedge funds, kept prices from falling further.

“Corn has already been beat down so low and we can only drive it down so far because funds are already so short,” said Karl Setzer, analyst with MaxYield Co-operative in West Bend, Iowa.

An increase in the USDA’s corn demand outlook, including a higher export forecast, also limited deeper declines, he added.

Earlier on Thursday, the USDA said corn export sales jumped last week to a 5-1/2-year high of more than 2.9 million tonnes, including 2.3 million for shipment in the current marketing year, topping trade estimates.

CBOT January soybeans fell 13-1/2 cents, or 1.4 percent, to $9.85 a bushel after hitting a 3-1/2-week high ahead of the report amid signs of strong demand from China.

The U.S. soybean industry has signed two letters of intent with Chinese importers covering a $5 billion purchase of an additional 12 million tonnes of soybeans in the 2017/18 marketing year, deals announced during President Donald Trump’s visit to Beijing.

The Chinese government raised its forecast for soybean imports in the 2017/18 crop year to 95.97 million tonnes from 94.5 million, boosted by strong crushing demand.

CBOT December wheat was up 2-1/4 cents at $4.29 a bushel, supported by a raised export forecast and tighter-than-expected U.S. supplies of higher protein varieties in its monthly report.

– Additional reporting by Gus Trompiz in Paris and Naveen Thukral in Singapore.