USDA's Carryout Surprise: A Bearish Signal for U.S. Soybean Prices in 2026?

The U.S. soybean market entered 2026 under a cloud of uncertainty, with the USDA's December 2025 supply-and-demand report sending ripples through global trade. The agency's projection of 350 million bushels in 2025/26 ending stocks-a sharp increase from the prior December estimate of 290 million bushels and above trade expectations-has sparked debate over whether this signals a bearish turn for prices. With global competition intensifying and domestic demand shifting, the implications for U.S. soybean fundamentals are clear: elevated carryout and weak export momentum are testing the resilience of a market already grappling with structural headwinds.

Elevated Ending Stocks: A Structural Shift in Supply-Demand Dynamics

The USDA's revised carryout estimate reflects a combination of higher production and weaker export demand. U.S. soybean output for the 2025/26 marketing year is projected at 4.262 billion bushels, driven by expanded harvested acres (80.4 million) and a yield of 53.0 bushels per acre. However, this surplus is not being offset by robust demand. Export forecasts have been slashed to 1.575 billion bushels, down 60 million bushels from December 2025, as China-the largest buyer-has slowed purchases amid domestic policy shifts and competition from Brazil's record harvest.

Global soybean ending stocks are also rising, with the USDA projecting 124.41 million tonnes for 2025/26, up from 122.37 million tonnes in the prior month. This trend underscores a critical point: the U.S. is no longer the sole driver of global soybean markets. Brazil's expanding production and Argentina's recovery from drought have created a more competitive landscape, diluting the pricing power of U.S. exports.

Export Softness and Domestic Demand Pressures

The bearish signal is compounded by softness in both export and domestic demand. China's reduced soybean purchases have left U.S. exporters scrambling, while the shift in renewable diesel feedstock toward tallow has eroded soybean oil demand. The USDA's January 2026 report noted a modest increase in the soybean crush rate, but this adjustment has done little to offset the broader trend of declining margins in the processing sector.

Analysts highlight that the U.S. soybean market is now in a "demand-driven slump." As stated by a report, futures prices fell 6 cents per bushel following the December 2025 USDA report, reflecting investor concerns over oversupply and weak export prospects. The lack of a bullish catalyst-such as a surge in Chinese demand or a South American weather shock-has left the market in a neutral-to-bearish stance, with prices increasingly tied to the pace of global production adjustments.

Market Reactions and the Path to 2026

The discrepancy between USDA projections and pre-report trade estimates further illustrates the market's uncertainty. While the December 2025 report left carryout unchanged at 290 million bushels, the January 2026 update raised it to 350 million bushels, far exceeding the 295 million bushel average pre-report estimate. This divergence suggests that actual stock levels are rising faster than anticipated, a development that could amplify price volatility as traders reassess risk premiums.

Market participants are now closely monitoring two key variables: China's purchasing activity and South American weather patterns. A rebound in Chinese demand could temporarily stabilize prices, but the long-term outlook remains clouded by Brazil's capacity to flood global markets with low-cost soybeans. Meanwhile, any disruptions in Argentina or Paraguay-such as logistical bottlenecks or unexpected weather events-could provide short-term relief for U.S. prices. However, these scenarios are unlikely to offset the structural oversupply pressures.

Conclusion: A Bearish Outlook with Conditional Hedges

The USDA's carryout surprise underscores a market in transition. Elevated ending stocks, weak export demand, and shifting domestic use patterns have created a bearish environment for U.S. soybean prices in 2026. While short-term volatility may arise from geopolitical or weather-related shocks, the fundamental drivers-global oversupply and competitive pressures-suggest a prolonged period of underperformance.

Investors and traders should prepare for a market where price resilience is contingent on external catalysts rather than internal fundamentals. As the USDA's January 2026 report demonstrated, the gap between expectations and reality is widening, and the bearish narrative is likely to dominate until demand conditions improve or supply-side adjustments accelerate. For now, the U.S. soybean complex remains a cautionary tale of how global agricultural markets are reshaping in an era of technological innovation and geopolitical realignment.