UPDATE 1-USDA boosts corn harvest forecast, seeing record yields; prices plunge

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CHICAGO, Sept 12 (Reuters) - The U.S. Agriculture Department on Wednesday issued a surprise increase to its corn harvest forecast due to expectations of record yields in key production areas such as Illinois, Iowa, Nebraska and Indiana.

The government also raised it outlook for soybean yields to an all-time high and further boosted its already-record soy production forecast.

In its monthly supply and demand report, USDA pegged the 2018/19 corn harvest at 14.827 billion bushels, based on an average yield of 181.3 bushels per acre. Soybean production was seen at 4.693 billion bushels, based on average yields of 52.8 bushels per acre.

If realized, the corn harvest would be the second biggest ever. Average corn yields would be a record.

A month ago, USDA had predicted the corn harvest at 14.586 billion bushels, with yields at 178.4 bushels per acre. Its August outlook had pegged the soybean harvest at 4.586 billion bushels, based on an average yield of 51.6 bushels per acre.

Analysts expected the USDA to cut its corn harvest outlook to 14.529 billion bushels and yields to 177.8 bushels per acre, based on the average of estimates given in a Reuters poll. Soybean production had been expected to rise to 4.649 billion bushels, with yields seen at 51.6 bushels per acre.

Chicago Board of Trade corn futures dropped 3.5 percent to their lowest in nearly two months after the report was released while soybeans turned higher.

USDA said that supplies would balloon due to the bumper harvests, with domestic soybean ending stocks for the 2018/19 marketing year rising to 845 million bushels. It pegged corn ending stocks at 1.774 billion bushels, up from its August estimate of 1.684 billion bushels.

Both the corn and soy ending stocks outlook topped the average of market expectations.

USDA kept its outlook for soybean exports steady at 2.070 billion bushels despite an ongoing trade war with China, the biggest overseas buyer.

It lowered its forecast for Chinese soybean imports to 94 million tonnes from 95 million. Earlier in the day, China slashed its forecast for 2018/19 soybean imports to 83.65 million tonnes. (Reporting by Mark Weinraub; Editing by Andrea Ricci and Jeffrey Benkoe)