Was Canada behind the shock increase in US corn stock inventories which sent grain markets tumbling?

That is one idea doing the rounds in market chatrooms - that investors were right to attribute the US Department of Agriculture's discovery of 200m bushels of extra corn to substitution of the grain for wheat in livestock rations.

But, as investors had not appreciated, that it was Canadian, rather than US wheat, which farmers were buying.

"The idea does have some support," Standard Chartered analyst Abah Ofon told Agrimoney.com.

And it does fit the facts. It would explain why  the  USDA also pegged US stocks of wheat higher, as of the start of last month, than the market had expected, despite a summer harvest which fell short of expectations.

Canada, meanwhile, reaped a poor quality wheat crop last year, thanks to harvest rains, leaving it with relatively bounteous supplies of feed wheat.

However... 

The trouble is that there is no evidence for it.

"We are not able to confirm it," Mr Ofon said, noting that official US data for June and July did not who particularly strong wheat imports from Canada, and that statistics for August were not available.

At Macquarie's New York office, Alex Bos said: "I think substitution of US corn with Canadian wheat is happening.

"The question is whether is happening at such an extent to affect stocks so much."

The export data indicated not, with some 13.7m bushels imported from Canada in June and July, according to the Census Bureau.

"Even if you had imports in August which were the best ever, you are not going to go much above 20m bushels," which is far too small to explain the data.

Storage theory 

So what else might explain the stocks data?

One possibility is a rise in on-farm storage, Mr Bos said.

"At elevators, every time grain goes over the weight scales, it must be reported for US Department of Agriculture surveys," he said.

"Storage on farms is far less easy to track." And high crop prices have encouraged farmers to invest in extra silo space.

At broker North America Risk Management Services, Jerry Gidel cited the potential for corn substitution by distillers' grains, a byproduct of expanding US corn ethanol production.

"Expanding distillers' grains feeding from 2010-11's larger ethanol demand is likely a portion of the explanation," Mr Gidel said, rating the high quality of last year's US corn crop as another, meaning the grain would go further for users.

Transport anomaly? 

Morgan Stanley cited ideas such as the USDA, as they did last year, inflating stocks data by counting newly-harvested corn as 2010 crop, although the department has tightened up its procedures to mitigate against this.

Other explanations could be the USDA overestimating demand by ethanol plants, whose greater efficiency meant they were squeezing more of the biofuel from every bushel of corn than historically, and an anomaly from a relatively low level of stocks being in transit.

"USDA data show that far less grain than normal was being transported by rail and barge when the survey was conducted  - exports were down and supply low," the bank said.

"As a result, it is possible that this year's survey picked up a larger-than-normal percentage of total US grain stocks."