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Corn hits 2-week high on short-covering ahead of USDA

CHICAGO - U.S. corn futures climbed more than 1 percent to a two-week high on Thursday as investors exited short positions ahead of the U.S. Department ofAgriculture's monthly crop report due on Monday, when the government was expected to trim corn yields.

Soybean futures edged lower at the Chicago Board of Trade, consolidating after four straight sessions of gains, while U.S. wheat futures were narrowly mixed in light-volume trading.

USDA in its September supply and demand outlook is likely to reduce the average corn yield to 173.4 bushels per acre, down from 175.1 bpa on Aug. 12 but still a record high, according to a Reuters analyst poll.

Analysts predicted USDA would boost U.S. soybean yields to a record of 49.2 bpa, up from 48.9 bpa in August.

U.S. Energy Information Administration data released at mid-morning on Wednesday showing sharply lower production of corn-based ethanol and decreased stocks of the biofuel was seen as bullish for ethanol prices but slightly bearish for corn.

CBOT December corn was up 3-1/4 cents at $3.36-1/2 per bushel as of 11:40 a.m. CDT (1640 GMT).

"There's a little short-covering in the corn market but the ethanol data capped any price gains. It was unexpected to see that drop (in ethanol output)," said Futures International analyst Terry Reilly.

EIA in a weekly report said U.S. ethanol output fell 25,000 barrels per day to 998,000 bpd, lowest since late-July.

CBOT November soybeans declined 2 cents to $9.73-1/2 per bushel and CBOT December wheat was up 1/4 cent to $4.03.

Trading volumes in corn, soybeans and wheat were light ahead of Monday's USDA data. A steep drop in corn open interest during Wednesday's session of higher prices suggested traders were exiting short positions rather than making new long bets, CME Group data showed.

Weekly USDA export data, due on Friday, was delayed one day due to Monday's U.S. Labor Day holiday.

Societe Generale analyst Rajesh Singla in a note to clients said a hike in USDA's U.S. soybean yields was largely factored in by traders.

"We believe that most of the negative news about record crop in the U.S. is already in the prices," Singla said. "We expect downward revision in the USDA's estimates for U.S. corn yields in coming months; however, we believe that there is still scope for an upward revision in soybean yields." 

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