Assessment of crop-tour yields, readouts from combine harvester monitors and grain-elevator sales reports have been the talk of the US corn market lately as participants attempt to assess the size of this year's uneven domestic crop.
Demand, however, will soon become the chief determinant of price, as the harvest already under way across the South begins in earnest across the heart of the Corn Belt this month. With ethanol demand topping out, exports threatened by competition, and feed demand constrained by poor margins, corn bears look set to dominate the market.
US ethanol production should play a more subdued role in corn-demand growth after driving it for the past five to seven years as refiners approach the government's mandated alternative fuel production targets and the 10pc "blend wall" caps the amount of ethanol that can legally be blended into the US fuel stream.
Indeed, the US Department of Agriculture is already projecting corn demand from the ethanol industry to come in below the five billion bushel mark for the second year running. It peaked at 5.02 billion bushels in 2010-11 and then eased to 5.01 billion the year after before dipping to 4.65 billion last year as high corn prices forced a number of refiners to halt production for several weeks.
This levelling off means the ethanol industry is clearly no longer growing at the rates that redefined usage in the 2005-09 era, when corn used in ethanol production vaulted from around 14pc to more than 35pc of total corn demand.
What's more, the general contraction in US fuel demand in recent years due to greater vehicle-fleet efficiency and more prudent driving patterns means that demand for ethanol itself is likely to slow and lead to a further decline in corn consumption by the sector as the industry moves to a more stable phase.
While ethanol has had the fastest-growing share of corn use over the past decade, the feedlot sector remains the largest, and is projected to account for four out of every 10 bushels consumed this year, or around 5.1 billion bushels.
That total is down by about one billion bushels from the high levels of corn-feed use seen in 2004-2005, but is still up more than 600 million bushels from last year's levels, which were also affected by the historically high corn prices that then prevailed.
Corn bulls are keen to cite the upside potential of feed demand in the low corn-price environment, and argue that the days when cattle feeders routinely chewed through more than six billion bushels annually could return if the price level spurs cattle production.
Such thinking overlooks the irreversible changes in the cattle industry wrought by the evolution of the ethanol industry. Not only have corn prices shifted but so has the feed-supply ingredient list by dint of dried distillers grains (DDGs), which are a byproduct of ethanol production.
Livestock feedlots domestically and abroad have worked to incorporate growing amounts of DDGs into cattle, hog and poultry rations in recent years as a protein-rich alternative to corn while corn prices rose to multi-decade highs.
Now that those prices are projected to move sideways or down, many corn traders are expecting at least some DDG portions to decline in favour of heavier corn servings. Nevertheless, animal herds have shown favourable growth rates while consuming DDGs, and feedlot managers have grown reliant on them to provide an element of risk diversification as a competitively priced alternative to feed grains.
Furthermore, whereas fresh corn supplies only come at harvest time, DDGs are created daily through the ethanol production process, resulting in a regular supply stream. That provides feedlot managers with the flexibility to incorporate higher amounts of DDGs into animal rations whenever other ingredients run tight.
For all these reasons, DDGs look here to stay, and are apt to act as a constraint on corn-feed use, serving to keep corn demand by the feed sector capped below previous highs. (Reuters)