uploads/2016/07/Global-Wheat-Stock-to-Use-Ratio-2016-07-13-1-1.jpg

Why Wheat’s Stock-to-Use Ratio Fell in July

By

Updated

Wheat’s stock to use ratio

Previously, we saw how the global stock-to-use ratio for corn impacted corn prices. In this part, we’ll analyze how wheat’s stock-to-use ratio compares to other years.

Article continues below advertisement

Ratio drops in July

The above chart shows how the global wheat stock-to-use ratio in 2016 moved compared to the past four-year period. The July 2016 global wheat stock-to-use ratio fell to 35%—compared to 36.2% in July 2015.

For each of these four months (April through July) in the past four years, wheat’s stock-to-use ratio has been significantly lower than in 2016. You can see this in the above chart.

What happened?

The drop in wheat’s stock-to-use ratio appears to be primarily driven by a decline in the global wheat inventory. The wheat inventory in July 2016 declined 1.6% to ~253 million metric tons from ~257 million metric tons a month ago. However, year-over-year, wheat’s global inventory was 15% higher—compared to ~219.8 million metric tons in July 2015, according to the USDA (U.S. Department of Agriculture).

Fertilizers played a key role in increasing yields over the years. Therefore, companies such as Intrepid Potash (IPI), Mosaic (MOS), CVR Partners (UAN), and CF Industries (CF) play a critical role in the agricultural sector (MOO).

The global wheat inventory has been rising over the past five-year period. The global wheat inventory was the lowest in 2013 at 181 million metric tons, according to the USDA. Naturally, wheat’s stock-to-use ratio was also the lowest in 2013.

In the next part, we’ll see how wheat prices moved over the past five years.

Advertisement

More From Market Realist