Farm Futures logo

The all-important stocks-to-use ratio

It’s not just about yield on the August USDA WASDE report. Stocks-to-use is also important.

Naomi Blohm, senior market adviser

August 11, 2021

3 Min Read
Abstract financial graph with gold and dollars line charts candle sticks and bar chart of stock market

Corn and soybean prices have been trading in a sideways consolidation pattern for over a month. A price break out is eminent. Which way the market breaks out depends on the August USDA report, and trader reaction to the report.

Initially traders will watch the yield numbers released by USDA -- is it higher or lower than trade expectations, and by how much? Next, traders will focus on total supply, and changes to demand, and how that equates to ending stocks.

Ending stocks is a way to quickly measure how much supply is left over or expected to be left over after any crop year. The stocks-to-use percentage is a more detailed view.

How to calculate ending Stocks-to-Use percentage

When you compare both the ending stock, along with the stocks-to-use ratio against previous years, this percentage number is a fantastic indicator of whether current ending stock levels are at historically small amounts (and justification for higher prices), or plentiful amounts (often times when prices move lower).

To calculate the Stocks-to-Use ratio, take the ending stock number, and then divide that by the total demand usage number (provided on the USDA report) which can then be expressed as a percentage.

Currently the stocks-to-use ratio for old crop corn and soybeans is significantly tight, which justified the higher prices this spring and summer. USDA’s August report will be of utmost importance to know where new crop ending stocks will be, and how that correlates into stocks to use. This will set the tone for the rest of 2021. 

When market scenario planning, it is essential to be aware of all possibilities. Prices can work either higher or lower, so be ready to capture opportunities and minimize price risks.

By having a fundamental understanding of supplies, demand, ending stocks and the stocks-to-use ratio, it empowers you to make better marketing decisions for the current marketing year. It also allows you to think outside the box at possibilities in the future.

As you know, having the upper hand on possible price scenarios allows you to have more consistent marketing, thus keeping your farm on top!

Reach Naomi Blohm: 800-334-9779, Twitter: @naomiblohm and [email protected]

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

About the Author(s)

Naomi Blohm

senior market adviser, Total Farm Marketing by Stewart Peterson

Naomi specializes at helping farmers understand how to manage cash marketing needs and understand the importance of managing basis, delivery point considerations, cash flow needs and storage capacity. She earned her Bachelor of Arts in Political Science with a minor in Agriculture Business at the University of Wisconsin in Platteville. She has a Master of Science in Adult Education with an emphasis in Ag Economics from the UW-Platteville and a Master Certificate in Global Education, from the UW-Oshkosh.

Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters

You May Also Like