Grains –
I want to review the thoughts on wheat and corn from last Friday in a bit more detail this morning. I think it is very important to note the differences developing in the world balance sheets between the two markets, and I want to make sure we’re clear on the subject. Today I want to offer two additional charts for your review to explain the changes.
I’ve calculated world ending stocks for both corn and wheat here in terms of days of use. And for each market I’m also calculating stocks in terms of days of use excluding Chinese stocks and use. This further underscores the points made on Friday.
In the case of wheat, yes when you account for China world ending stocks in terms of days of use have ballooned substantially in recent years, but excluding China this is a completely different story. Any potential weather adversity this year might put the wheat market into an interesting position. Of course this days of use calculation is accounting for demand and any supply disruption will affect demand and thus the calculations… but you still get the point.
Corn is the opposite of wheat, with the Chinese government force-feeding domestic corn consumption to unload their inventories. Outside of China, however, stocks appear to be building further after bottoming at the 2012 drought.
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