“Inventory levels are really tight right now,” and there remains a risk that U.S. harvests in September and October may not be sufficient to revive supplies, said Kelly Wiesbrock, a portfolio manager helping to manage $1.3 billion of assets for Harvest Capital Strategies, a San Francisco-based hedge fund.

As of Jan. 29, the U.S. Drought Monitor classified 51 percent of nine Midwest states with soil-moisture levels below 20 percent of normal, including some at zero, with water shortages and crop damage likely. The region produces most of the nation's soybeans. A year earlier, 20 percent was in drought.

“We're still behind the curve on moisture levels and a lot of guys are saying we're setting up for another drought,” said Wiesbrock, who grew up on a farm in Illinois, where his brothers, father and grandfather still grow corn and soybeans on 3,000 acres. “We may get off to a good start and have trend- line yields and they'd be less tight, but you don't rebuild inventories in one year and we don't harvest until the end of the year.”

Eoin Treacy's view My view – Global supplies of key agricultural commodities remain finely balanced but the record low carryover from harvests over the last decade has depleted inventories. This has resulted in very little slack being available in case of a crop failure, weather or political trouble. The risk of price spikes in any one of a number of agricultural commodities remains non trivial against this background.

In nominal terms, soybeans ranged between 400¢ and 1000¢ from 1973 to 2007. We are now in a new pricing environment where the 1000¢ area is likely to act as a floor during corrections for the foreseeable future. Despite occasional bouts of volatility soybeans have held a progression of higher major reaction lows since 2009 and a sustained move below 1350¢ would be required to question medium-term scope for continued higher to lateral ranging.