Gro’s Stocks-to-Use vs. Price Framework is a price valuation model for corn and soybeans using the US stocks-to-use ratio. A stocks-to-use ratio is a normalized inventory measurement frequently used to assess supply availability, and is therefore a helpful tool for analysis over different time periods and of different crops. The model calculates a “fair value” price estimate based on the historical relationship between the stocks-to-use ratio and prices.
Customers Use the Model to:
- Understand what percentage of annual demand is on hand at the end of the year
- Gauge tightness of available crop supplies and how that might impact price
- Improve projections for planted area in the year ahead for a given crop
Why It Matters
A stocks-to-use ratio is a normalized inventory measurement and is therefore a helpful tool for analysis over different time periods and for different crops. It’s frequently used to assess supply availability and shows what percentage of a year’s demand will be available at the end of the year. It is a valuable metric because it accounts for the fact that demand generally increases over time. For example, a stockpile level that was adequate 20 years ago is not adequate today.