The soybean stock-to-use ratio, which tells us where the supply–demand dynamics stand, is key to how the commodity’s prices move. Let’s look at how the recent soybean prices have trended over the years.
This can also help us understand the fundamentals of fertilizer companies such as PotashCorp (POT) and CF Industries (CF), as well as a broader portfolio of ETFs such as the VanEck Vectors Agribusiness ETF (MOO).
Soybean prices in September trended lower after reaching a high of $11.80 per bushel in June 2016. On September 12, 2016, soybean prices stood at $9.80 per bushel, compared to $10.00 per bushel in August.
This month’s decline in soybean prices come on the back of an increase in global inventory, as we discussed in the previous part of this series. However, soybean prices are 11% higher compared to the corresponding day in September 2015.
Soybean and corn prices are still low compared to the past five-year average. This is also why farm income has been declining over the years. In the near term, an environment of low crop prices fails to generate excitement in the seeds and fertilizer sectors, affecting related companies.
Next, we’ll discuss stock-to-use for wheat and its price trends.