In 2016 soyabean prices had their best year since 2012. But a repeat performance for the oilseed in 2017 may prove difficult thanks to challenges on both the supply and demand fronts.
Front-month Chicago soyabean futures finished last year up 14 percent from where they began the year, peaking at 35 percent in June. The most active March 2017 contract is up nearly 18 percent over where last year's contract sat a year ago today.
Speculators opened 2017 with a net long position of 94,247 contracts in CBOT soyabeans futures and options - very similar to where both 2013 and 2014 began, but considerably different from 2016.
Although this long position has decreased five weeks running, optimism could wane even further in the coming months, especially since the fundamentals are not exactly bullish.
Of the last five years, soyabean prices performed most poorly in 2014, and there are many signs that suggest 2017 could follow in its footsteps and start heading south.
Major global soyabean growers have incentive to increase planted area in 2017 - most notably the United States, the world's largest producer.
The US Department of Agriculture pegged this year's acres to rise 1.8 million acres from 2016's record area, but many analysts believe increases closer to 5 million acres could be in store. This is based on the record profitability margins over competitor crop corn as implied by the futures price ratio of new-crop soyabeans to corn.
Come spring, it may become more difficult for soyabean bulls to make their case if US farmers greatly increase plantings and sown area ends up in the upper 80 million-acre range.
A similar scenario was present in 2014 as the new-crop soyabean-to-corn price ratio opened the year at the highest level in eight years. That summer, US soyabean acreage rose 6.4 million acres on the year.
As such, front-month soyabean futures topped out for the year on April 30, and then sharply tumbled by mid-to-late summer, anchored by big yields.
Toward the end of 2017, more soyabeans are likely to be sown in No. 3 producer Argentina for its 2017/18 campaign than were planted this go-around. The country's soyabean export tax will be incrementally reduced beginning in 2018 - from the current 30 percent to 18 percent by 2020 - encouraging farmers to favor the oilseed over its grain rivals.
Back in early 2014, a record 2013/14 South American soyabean crop was expected to eventually flood the market - which was indeed the case. This year, analysts predict that leading exporter Brazil will raise a massive 103 million tonnes of soyabeans over the next several months.
Midway through 2014, US soyabean yields were on track for an all-time best - on top of the rise in area. National yield ultimately topped the previous record by 8 percent that year, adding more pressure on soyabean futures.
But here is where soyabean prices could find a loophole in 2017.
Though it would not be impossible, it is reasonable to assume that US 2017 yields that end up matching last year's staggering 52.5 bushels per acres would be an extremely difficult feat. If US farmers plant 88 million acres of soyabeans, national yield must reach 50 bpa to match 2016's record harvest volume.
Therefore a decline in US production is very realistic in 2017 and given the narrow margin of error between supply and demand, a smaller harvest could quickly vaporize carryout and boost soyabean prices - even if yield ends up in the very respectable high-40 bpa range.
At the end of 2014, the 2014/15 South American crop appeared likely to set a new harvest record by a mile yet again - which of course it did - further justifying the lower track of soyabean futures at year-end. Conditions in Brazil and Argentina heading into the 2017/18 season will largely influence how soyabean prices round out 2017.
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