According to Societe Generale (SocGen), the reason behind the unexpectedly strong US corn stocks, which have depressed prices, is the switch of livestock farmers to using distillers' grains instead of traditional feed sources.

 

The declining levels of feed use of corn, without much of a balancing uptick in demand for other grains including wheat, and evident in inventory data, have continued to puzzle analysts.

 

Darrel Good, at the University of Illinois, has termed estimates "troublesome", while Darren Dohme at Illinois-based Powerline Group, has long accused the USDA of a "lack of logic" in its data.

 

However, the phenomenon looks like it can be explained after all by substitution of the likes of, in particular, corn with so-called distillers' grains with solubles, or DDGS, produced by biofuel plants as a byproduct of making bioethanol, SocGen analyst Michael Haigh said.

 

A trend of the US exporting a lower proportion of its distillers' grains, which kicked off in the March-to-August period last year, had continued in the 2011-12 marketing year, which began in September.

 

Indeed, the US in the September-to-November period exported only 14% of its output of the byproduct, compared with 22% during the same three months last year, a drop which reflected growing domestic demand.

 

"With what appears to be an increased domestic use of DDGS, it seems that the US Department of Agriculture is not currently underestimating [US] corn feed usage," Dr Haigh said.

 

In a further sign of the popularity of distillers' grains, its price compared with corn and wheat had sunk to below-average levels, but remained "attractive" to livestock farmers.

 

The decline in US shipments of distillers' grains has also been fuelled by a slide in sales to China, which has launched an anti-dumping case against the exports in 2010, and is not expected to finish the probe until the end of June.

 

Exports to China tumbled by nearly one-half to less than one million tonnes in the January-to-September period last year.

 

Meanwhile, the USDA has identified greater rationing by livestock feeders, to 1.35 tonnes per animal use per year from a recent high of some 1.8 in 2004-05, as contributing to the drop in consumption of feed by livestock farms.

 

Feed and residual use of coarse grains, such as barley, corn and oats, is seen down nearly 12% over the past two seasons, and that of wheat down 3.3%.

 

Some analysts are sceptical over the degree to which distillers' grains are responsible for this downturn, with Professor Good saying it does not address "the inconsistent seasonal pattern of implied use" evident in unusually high US corn inventories at the start of September.

 

Transparency is seen being held back by a dearth of official information on the sector, with the USDA cancelling a report series on distillers' grains last year before it had even been launched.

 

Research by Iowa State University suggest that US livestock farmers are using distillers' grains sufficient to replace some 1.2 billion bushels of corn a year, in the main in the beef sector, where feedlots uses large quantities of feed to fatten cattle.