The higher supply outlook put renewed pressure on prices.

The U.S. Department of Agriculture, in a monthly report issued Friday, estimated end-of-marketing-year domestic soybean supplies at 230 million bushels, up 18% from the department's estimate a month ago.

This was 16 million bushels above trade estimates, and it was also the largest amount of soybean carryout for the United States in the past five years, said Karl Setzer, analyst with MaxYield Cooperative in West Bend, Iowa.

Soybean exports were reduced 25 million bushels to 1.3 billion, mainly due to a slow export sales pace through November, and strong export competition from South America, the USDA said in its report. Brazil, the USDA said Friday, is now expected to export 38.5 million metric tons of soybeans in the 2011-12 marketing year, up from last month's prediction of 38 million tons.

With fewer exports, U.S. inventories are returning to more comfortable levels, easing concerns over supplies that drove futures to a three-year high in late August. Export demand is a key factor in determining the price of soybeans, with 45% of the soybeans grown in the U.S. going to the export market during the last crop year ending Aug. 31. As overseas demand shrinks, U.S. soybean futures prices will slip.

CBOT January soybeans ended down 25 1/2 cents or 2.3% at $11.07 per bushel.

The agency also raised its outlook for wheat supplies by 6%, expecting inventories to reach 878 million bushels ahead of next year's harvest. The higher inventories were the result of a 50-million-bushel reduction in projected U.S. exports.

The cut in exports highlight U.S. exporters' troubles competing amid abundant global supplies. "We're one of the highest-priced wheat sources out there. We've got these other countries that have cheaper feed wheat," said Brandon Kliethermes, ag economist with IHS Global Insight.

Meanwhile, Minneapolis spring wheat gained as traders note the U.S. is still the main supplier of high-quality wheat.

March CBOT wheat dropped 1 cent to $5.96 a bushel, MGEX March wheat rose 6 cents to $8.27 1/4, and KCBT March wheat added 3 cents to $6.61 1/2.

The supply forecast for wheat and soybeans surprised analysts, who were expecting a rise, but not as large as was forecast.

U.S. corn futures ended lower as USDA reports that global grain supplies continue to grow. "There were no noteworthy changes to the U.S. corn balance sheet, but the bearish wheat and soy reports kept pressure on the market," said Sal Gilbertie of Tecrium Corn Fund.

"With those two commodities getting a better supply situation, that will likely keep a damper on whatever corn wants to do on the upside, at least until the next report," he added.