Stocks-to-use ratio

The stocks-to-use ratio is a commodity's ending inventory divided by its total consumption for the same period, expressed as a percentage or in weeks of supply.

Stocks-to-use is the single most watched supply number in agricultural markets. Raw inventory figures mean little without knowing how fast the commodity is used: a stockpile that would feed the world for two months is comfortable; the same tonnage against a much larger demand is thin. Dividing ending stocks by use puts every crop and every year on the same scale.

The relationship with price is not linear. When the ratio is high, extra bushels barely move the market. As it falls toward the level where mills and feeders start to worry about running out before the next harvest, small changes in supply cause large price swings. This is why a modest downgrade to a harvest forecast can send grain prices sharply higher when stocks are already lean.

The USDA publishes the ratio for major crops each month in the WASDE report. Traders watch changes in the ratio as closely as the level. See stocks-to-use and why commodity prices spike.