Grain Stocks Remain Tight

From Russia invading Ukraine to China’s appetite for corn imports and a string of below-trend yields, there have been several narratives around the jump in commodity prices since 2020. Running in the background of these developments has been tight ending stocks – a situation that will again be a factor for the 2023 growing season.

In this Weekly Insights post, we’re reviewing U.S. and global ending stocks of corn, soybean, and wheat.

U.S. Corn, Soybean, and Wheat Usage Trends

Figure 1 shows the U.S. stocks-to-use ratio for corn since 2000. At 9.1% of usage, stocks for the 2022/23 marketing year remain below the long-run average of 12.6%. Furthermore, corn stocks have been below the long-run average for three consecutive years.

Corn stocks were considerably tighter the last time corn prices rallied above $6 per bushel. In 2010/11, the stocks reached 8.7% of usage and eventually fell to just 7.4% in 2012/13.

The soybean situation is similar: tight but not record-low. For the 2022/23 marketing year, soybean stocks are at 5.2% of usage, the lowest since 2015/16, and below the long-run average of 8.0%. However, between 2012/13 and 2014/15, soybean stocks slipped below 5%. At the lowest, stocks were 2.6% of usage.

Figure 2 points out how dramatically and quickly stocks expanded during the trade war. For the 2018/19 marketing year, stocks hit 22.9% of usage. The situation in 2019/20 improved, but mostly because of massive prevented plantings that season.

Figure 3 shows the U.S. wheat ending stock situation. Overall, wheat stocks are considerably larger than corn or soybeans. To this point, the long-run average stocks-to-use ratio for wheat in the U.S. is 35.4%. For 2022/23, U.S. stocks slipped below 30% for the first time in several years.

For those curious, the drop in U.S. wheat stocks has largely been the result of lower production and not an export boom stemming from the Ukraine invasion. Compared to two years ago (2020/21), wheat production in 2022/23 was 10% lower, and exports were 22% lower.

The Global Picture

Tight corn, soybean, and wheat stocks have also played out globally. Figure 4 shows the global stocks-to-consumption ratio, less China’s ending stocks. In 2022/23, China held 70% of global corn stocks, 32% of soybean, and 54% of wheat. Given that China isn’t an exporter of these commodities, those stocks were removed to provide a more accurate picture of how much grain was available for global trade.

In recent years, the stocks for all three crops have trended lower. Current corn stocks are only slightly ahead of the 2012/13 lows. For wheat, stocks are at the lowest levels since 2007/08.

Wrapping It Up

Due to tight ending stocks, any production concerns in 2023 could trigger a dramatic price response. In the U.S. and around the globe, ending stocks are tight across wheat, corn, and soybeans. The degree of historical significance varies, but the trend has been unfolding for a few years.

One frustration of using traditional measures of ending stocks – total bushels or the stocks-to-use ratio – is that you can’t easily aggregate across all commodities to size up the overall ending stock situation for all crops. In a recent AEI Premium article, we did just that and found that conditions in the U.S. and globally are historically tight. The implications are that there isn’t much wiggle room, and each crop will be bidding, to some degree, for acres going into 2023.