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Crop Prices Rise: Positives for Seed and Fertilizer Companies

PART:
1 2 3 4 5 6 7
Part 2
Crop Prices Rise: Positives for Seed and Fertilizer Companies PART 2 OF 7

Why Did Corn’s Stock-to-Use Ratio Fall in October?

Corn stock-t0-use ratio

In the agriculture industry, the stock-to-use ratio tells us how much inventory of a particular crop, carried over from the previous period, is available as a percentage of total consumption. A higher supply of crops to its demand results in a higher stock-to-use ratio, which is often negative for crop prices and vice versa.

Why Did Corn&#8217;s Stock-to-Use Ratio Fall in October?

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October levels

Corn’s latest global stock-to-use ratio in October 2016 stood at 21.5%—just slightly below the ratio of 21.8% in September. The falling stock-to-use ratio in the above chart is positive for improving crop prices. However, the global corn stock-to-use ratio remained elevated in October compared to the same month from 2012–2016, as you can see in the above chart.

October inventory

The global corn stock-to-use ratio in October fell slightly due to a fall in the global corn inventory. The global corn inventory fell 1.2% to ~217 million metric tons in October—compared to 219 million metric tons in September 2016.

However, the global corn inventory remained significantly higher—up 15%—compared to October 2015 when the global corn inventory stood at 188 million metric tons.

A higher corn supply without changes in consumption usually leads to lower realized prices impacting farm income. These factors have an impact on corn prices. They determine the fate of seed companies such as Monsanto (MON) and Syngenta (SYT). They also impact fertilizer companies (MXI) such as Agrium (AGU), PotashCorp (POT), Chemical & Mining Co. of Chile (SQM), and Mosaic (MOS).

In the next part, we’ll discuss how corn prices moved over the one-month period.

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