The stock to use ratio indicates the level of carryover stock for any given commodity as a percentage of the total use of the commodity. The stocks-to-use ratio is technically an indicator of supply relative to demand in quantity terms.
So when the stock to use ratio goes down, prices go up. Let's illustrate this with some graphs. The CME regularly reports the latest stock to use ratios here. For example, corn STU ratios can be found here. Corn prices can be found in the chart below:. When analyzing both charts, we see that when the STU ratio went down in , we saw a price spike in corn a few years later Then the STU ratio went up in and consequently we saw a drop in corn prices in As the STU ratio is topping off again in , I expect to see a rise in corn prices very soon.
The rise in corn prices is also supported by the rough weather in Brazil. Let's look at wheat. The wheat STU ratio has ween going up since , so it's clear we have an oversupply in wheat. Wheat prices have also been dropping since , with a small upside correction in when STU ratios went down.
Looking at the trend in STU ratio, I don't see a bullish pattern in wheat at this moment. As for soybeans, we have the following chart. The STU ratio crashed in and this lead to a doubling of the soybean price in that year. Today in , we see a similar trend where both world and U. STU ratios crash down, so I expect that soybean prices will do well going forward. Reports of Brazil having too dry weather and Argentina having too wet weather have supported soybean prices.
Corn prices can be found in the chart below:More...