Gro’s Stocks-to-Use vs. Price Framework is a price valuation model for corn and soybeans using the US stocks-to-use ratio. A stocks-to-use ratio is a normalized inventory measurement frequently used to assess supply availability, and is therefore a helpful tool for analysis over different time periods and of different crops. The model calculates a “fair value” price estimate based on the historical relationship between the stocks-to-use ratio and prices.
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Why It Matters
A stocks-to-use ratio is a normalized inventory measurement and is therefore a helpful tool for analysis over different time periods and for different crops. It’s frequently used to assess supply availability and shows what percentage of a year’s demand will be available at the end of the year. It is a valuable metric because it accounts for the fact that demand generally increases over time. For example, a stockpile level that was adequate 20 years ago is not adequate today.
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