The bottom-line fundamental number is stocks-to-use. I’ve long said stocks-to-use is the Readers’ Digest version of supply and demand, in that this one number can tell us the bullishness, bearishness, or neutrality of a market’s fundamentals. I’ve also argued endlessly over the years with economists, my point being there should be a strong positive correlation between stocks-to-use and national average cash price (National Price Indexes). Given this premise, I’ve developed my system between the two for the five major markets (corn, soybeans, and three major wheat classes) with the r-squared[I]for all near 100%. Using this system I can pull data any day of the month, but by using the end of month number it gives us a picture of the available stocks-to-use (as/u) situation at month-end, a system that should smooth out the wide changes seen at the end of a marketing year. It also puts a spotlight on what I call the Marketing Year Misdirection, meaning supply and demand is a constant flow rather than a hard line drawn between old-crop and new-crop.
CORN: The National Corn Index (NCI) was calculated at $3.90 on June 28, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 13.1%. The end of May showed $4.26 and 12.4% with June 2023 coming in at $5.31 and 10.6%. From a fundamental point of view, there is much to talk about with the NCI. To begin with, it seems on farm supplies are making their way to town as we move deeper into summer. The end of June as/u of 13.1% was the largest since 13.4% at the end of October 2020. Going back to our comparison of 2020-2024 to 2010-2014, the NCI was calculated at $4.02 at the end of June 2014. Recall the NCI would eventually post a low monthly close of $2.84 at the end of September 2014. The NCI remains weak in relation to September futures with basis at 17.25 cents under.
SOYBEAN: The National Soybean Index (NSI) was calculated at $10.93 on June 28, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 11.8%. The end of May showed $11.43 and 10.2% with June 2023 coming in at $14.44 and 4.5%. The NSI finished below $11 for the second time in three months, with the end of June as/u the largest since 14.8% at the conclusion of October 2020. The next key price month-end price for the NSI is $10.80 from February 2024 with a move below that mark opening the door again to the previous long-term downside target (monthly close-only) of $10.25. Recall this was established as the NSI completed a head and shoulders top pattern at the end of April 2023 (you can dig back through the archives to see what I said at the time). Activity during July looks to be important, so stay tuned.
SRW WHEAT: The National SRW Wheat Index (SWI) was calculated at $5.06 on June 28, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 44.0%. The end of May showed $6.22 and 37.0% with June 2023 coming in at $5.97 and 38.4%. With the 2024 harvest rolling along at the end of June, the SWI was roughly equal to where it was at the end of March 2024. This was also the highest end of June as/u since 2020 when the SWI was $4.73 and as/u was calculated at 46.0%.
HRW WHEAT: The National HRW Wheat Index (HWI) was calculated at $5.36 on June 28, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 41.9%. The end of May showed $6.82 and 36.0% with June 2023 coming in at $7.53 and 31.8%. As with SRW, the 2024 HRW harvest continues to chug along bringing more supplies to the market at a time when demand remains sluggish. The end of June as/u was the largest end of month figure since 42.7% at the end of November 2020 and the largest end of June figure since that same year of 48.6%.
HRS WHEAT: The National HRS Wheat Index (HSI) was calculated at $5.65 on June 28, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 43.8%. The end of May showed $7.00 and 37% with June 2023 coming in at $7.75 and 33.8%. June saw a dramatic shift in spring wheat fundamentals, not only with national average basis collapsing but the HSI posting its lowest monthly close since November 2020 when as/u were calculated at 46.0%.
[i] R-squared is defined as “a statistical measure of fit that indicates how much variation of a dependent variable is explained by the independent variable in a regression model.” (Investopedia). In my world, it is how closely related two (or more) variables are, in this case national average cash price and stocks-to-use.
