Is ethanol's increasing take of US corn changing the rules on the grain?
Investors were certainly taken off guard on Tuesday by the firm demand that US officials are predicting for domestic corn. That strength is the reason that America's corn supplies are seen closing both the current season and 2011-12 below a snug 900m bushels.
They had expected some pick-up in consumption, after the sliding prices of the grain last month made it more affordable. Futures were dented first by liquidation, and then unexpectedly strong planting performance by US farmers.
But the extent of the rise in demand estimates reflected the surprisingly strong appetite of corn ethanol plants, for which demand was raised by 150m bushels over the current and forthcoming seasons.
And that upgrade was particularly significant.
Biofuels groups now consume more corn than livestock farmers, US Department of Agriculture officials said on Tuesday, bringing forward to 2010-11 the season when they see more of the grain going into ethanol than animal feed.
That is overlaying fresh behaviours onto corn demand, of which a link between ethanaol and broader energy markets - and other ethanol sources such as sugar for that matter - is only the most obvious one.
Ethanol plants, to some extent, switch to alternative feedstocks. They have shown able this week, by rail-to-silos group The Andersons, to take in some quantities of soft red winter wheat.
Crucially, ethanol producers may be more able to slow, or even stop, output in response to unprofitable conditions. Indeed, they factor maintenance downtime in operational schedules.
That's not so easy for feedlots relying on feeder-to-fed cattle cycles lasting half a year or so.
If ethanol producers turn the taps on and off more quickly in response to varying corn costs than livestock feeders, that would not be without market consquences.
It could, for instance, make corn demand more responsive to price, and help explain the kind of data changes unveiled on Tuesday.
That might, in theory, reduce volatility in corn prices too. Which would be some public relations consolation for an industry whose rise to greater prominence than the livestock industry in corn consumption may provoke a fresh round of questions over its moral value.
By Mike Verdin