Stocks-to-Use Ratios and Grain Price Volatility

Abstract

<p>Speculation in the agriculture community early this year focused not only on a new farm bill but also on the abnormal world grain market conditions. Much of the market speculation centered on the fact that we currently have high prices driven by strong demand and low supply. This has caused stock holdings of grain to be drawn down. An indicator of the stock situation relative to consumption can be found in the stocks-to-use ratio. This indicator is useful for evaluating grain price movements and potential movements. This article briefly explores the market relationships that underlie this ratio. It also serves as an introduction for a new addition to the indicator section of this publication.</p>