The USDA forecast the 2015-16 soybean harvest at 3.916 billion bushels based on an average yield of 46.9 bushels per acre. Both figures were above the government's previous forecasts and topped the high end of the range of market estimates.
Corn and soybean futures fell sharply after the report was released, with Chicago Board of Trade new-crop November soybean futures sliding 5.8 percent to its lowest since mid-June. December corn sagged 5.6 percent.
Dennis Gartman, author of the Gartman Letter, called it a "real shocking report," adding that the "bean and corn numbers are stunningly bearish."
The report surprised other market watchers, who have warned for months that the eastern flooding likely cut into soybean seedings and limited harvest potential in planted areas hit by the rains.
"The size of the increase was a surprise—it is a slap in the face," said Rich Nelson, analyst at Allendale.