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 $3.82 on October 31, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 13.3%. The end of September 2024 showed $3.93 and 13.1% with October 2023 coming in at $4.53 and 11.9%. This was the largest October as/u since 2020’s 13.4% (the NCI was $3.78). However, the US corn market’s Supply and Demand situation seems to have stabilized, despite continued weak national average basis indicating the 2024 crop was large.
SOYBEAN: The National Soybean Index (NSI) was calculated at $9.29 on October 31, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 18.4%. The end of September 2024 showed $9.94 and 15.4% with October 2023 coming in at $12.38 and 7.9%. This was the largest month-end as/u since August 2020’s 19.0% (the NSI was at $9.01) and the largest October as/u since 2019’s 22.7% (NSI at $8.52). The bottom line is there continues to be ample US supplies to meet demand.
SRW WHEAT: The National SRW Wheat Index (SWI) was calculated at $5.05 on October 31, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 44.0%. The US SRW wheat supply and demand situation seems to have stabilized, though the SWI near $5.05 has it in the upper 45% of its price distribution range (weekly closes only) over the past 10 years. The bottom line is US SRW wheat supply and demand is as it usually is: Neutral-to-bearish.
HRW WHEAT: The National HRW Wheat Index (HWI) was calculated at $5.12 on October 31, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 43.3%. The end of September 2024 showed $5.25 and 42.5% with October 2023 coming in at $5.65 and 40.3%. This was the largest end of October as/u since 2019’s 50.0% (the HWI was at $3.96). There continues to be ample supplies of US HRW wheat to meet demand.
HRS WHEAT: The National HRS Wheat Index (HSI) was calculated at $5.64 on October 31, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 43.9%. The end of September 2024 showed $5.72 and 43.4% with October 2023 coming in at $6.65 and 38.6%. This was the largest end of October as/u since 2020’s 46.0% (the HSI was at $5.23).
[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.
