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 $3.93 on September 30, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 13.1%. The end of August 2024 showed $3.69 and 13.6% with September 2023 coming in at $4.49 and 12.0%. While this was the largest September as/u since 2020’s 13.8% (the NCI was $3.52), it’s interesting to note corn’s supply and demand situation tightened a bit during September despite harvest progressing. This tells us demand remained strong.
SOYBEAN: The National Soybean Index (NSI) was calculated at $9.94 on September 30, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 15.4%. The end of August 2024 showed $9.49 and 17.4% with September 2023 coming in at $12.09 and 8.5%. This was the largest end of September as/u since 2020’s 16.3% (the NSI was priced at $9.68). However, the September numbers were back in line with what was seen at the end of July 2024 ($10.00, 15.2%). This indicates export demand has improved, a seasonal move, while the 2024 harvest brings in more bushels.
SRW WHEAT: The National SRW Wheat Index (SWI) was calculated at $5.09 on September 30, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 43.8%. The end of August 2024 showed $4.73 and 46.2% with September 2023 coming in at $4.61 and 47.0%. Indications are the low national average cash price is finally starting to spark new demand. Recall from Monthly Analysis the SWI moved into a long-term uptrend at the end of August.
HRW WHEAT: The National HRW Wheat Index (HWI) was calculated at $5.25 on September 30, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 42.5%. The end of August 2024 showed $5.04 and 43.5% with September 2023 coming in at $5.95 and 38.8%. While still a long way from being a tight S&D situation, the HWI did indicate the US situation tightened slightly during September.
HRS WHEAT: The National HRS Wheat Index (HSI) was calculated at $5.72 on September 30, 2024, a price that correlates to an end of month available stocks-to-use (as/u) of 43.4%. The end of August 2024 showed $5.35 and 45.4% with September 2023 coming in at $6.41 and 39.8%. With the 2024 spring wheat crop now tucked away, the seasonal tendency of the HSI is to rally into next May.
[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.
