The ratio between grain end stock and consumption is declining despite record production in the 2020/2021 season.
The world is producing record grain this season 2020/2021, is the expectation of the International Grains Council (IGC). The IGC expects a harvest of 2.22 billion tons. However, this does not have to lead to strong price pressure, because grain consumption also reaches a record 2.21 billion tons.
Because the production is slightly higher than the consumption, the grain stock increases slightly at the end of the season. However, as demand is also increasing, the IGC expects the closing stock to consumption ratio to fall to its lowest level in 6 years. This stock-to-use ratio is a measure of price formation for the grain trade. The smaller the stock compared to consumption, the less a disappointing harvest can be absorbed.
The fall in the stocks-to-use ratio for grain is mainly because the world consumes a lot of corn (1.18 billion tons). The IGC states that this season, for the fourth consecutive year, the world will be consuming more corn than is taken from the land.
Overview of futures prices for: corn, wheat and soybean
With wheat, the harvest (762 million tons) does exceed consumption (750 million tons). As a result, this season ends with a record stock of wheat. This puts pressure on the wheat price. But when corn gets more expensive, it also supports the wheat price, because both grains are partly interchangeable.