It’s sometimes easy to get hyper-focused on the last WASDE estimates for U.S. grain production while losing track of the global ending stock trends. This week’s post reviews the latest for corn, soybeans, and wheat, which have turned mostly tighter through the 2021/22 marketing year and in recent years.
Figure 1 shows global stocks to consumption ratios for corn, soybeans, and wheat since 2000. Using this measure, stocks have tightened in recent years but generally remain above the lows observed roughly a decade ago. For example, corn ending stocks are currently at 26% of consumption, down from a recent high of 33% in 2016/17 but considerably above the 2010/11 low of 13%.
As we noted a few years ago, global grain stocks often require some pause to consider China’s effect on global inventories, which accounts for a significant and growing share of global ending stocks. For corn, China’s ending stocks account for roughly 70% of the global total, up from around 30% in the mid-2000s (Figure 1). The trend is the same for wheat and soybeans, where China represents 50% and 35% of ending stocks, respectively.
On the one hand, the upturn in ending stocks could signal China has frontloaded purchases and might not need to buy as much in the future. There could also be data quality issues. Either way, China is a net consumer of these crops, and, as a result, those stocks are likely unavailable for global trade. In other words, China is unlikely to export these crops, so we should consider removing them from the global inventories when thinking about overall availability.
Figure 2 considers the global stocks situation, less China. This isn’t a perfect measure but highlights how China’s increase in stocks has affected the perception of global stocks abundance.
For corn, current stocks are at 8% of consumption, again trending lower in recent years. However, the current level is only slightly more abundant than the 2012/13 lows of 7%. Since 2000, the consumption ratio has averaged 10%.
Similarly, China’s increasing share of global stocks makes the soybean and wheat situations appear less abundant than what might initially seem to be the case. Soybeans, currently at 16%, are well below the long-run average (21%), and wheat stocks are at 18% of consumption, slightly below the long-run average of 19%.
Wrapping It Up
How tight are global grain stocks? It depends on how one measures and accounts for China’s large and growing share of global inventories. As earlier discussed, it’s up for debate if these grains are truly available for global trade. However, China is a large global consumer of these crops, and large inventories could signal less aggressive purchases will be necessary in the future.
Finally, it’s important to keep in mind that ending stocks are often the most difficult value for the USDA – or anyone – to estimate. We’ll leave you with comments we shared previously when thinking about China’s corn buying spree:
“Arguably, the hardest thing to estimate for any country is ending stocks, and the reason is pretty simple – all the errors accumulate here. For a given year, any error in the above categories (trade, production, usage) would affect ending stocks, but also the error of previous years. If there are systemic errors in the estimates of trade, production, and usage, those will begin to skew ending stocks estimates over time.
To deal with this in the U.S., the USDA conducts the quarterly grain stocks report, which essentially ground checks various production, consumption, and trade estimates with how much grain remains in inventories. This is not done for the foreign country estimates, like China.”