Even with large exports, expectations were for generally adequate stocks of U.S. soybeans at the end of the 2010-2011 marketing year. The projection of those stocks dropped sharply early last week, however, as the USDA lowered the expected size of the 2010 U.S. harvest and increased the forecast of exports, Good notes.

"Soybean oil prices have been supported by the projection of a second consecutive year of a 5% increase in world vegetable oil consumption and a further decline in world vegetable oil stocks," he says.

Domestically, soybean oil consumption for food is expected to be near that of last year, while exports are expected to decline by 20%. The USDA projects a 1.2-billion-pound (72%) increase in soybean oil use for the production of biodiesel. Use declined sharply last year due to the expiration of the blender's tax credit, he says.

"To reach the USDA projection of 2.9 billion pounds, use will have to average 242 million pounds per month. Use during the last month of the 2009-2010 marketing year (Sept. 2010) totaled 98 million pounds," he says.