U.S. ending stocks numbers for corn and soybeans have become available for year end 2012, and the results are stunning. Ending stocks are, in essence, the amount of unused stock of a product left over at the end of the year nationwide.
The chart below represents corn “stocks-to-use” ratio since 1980. Stocks-to-use is a measure of how much grain inventory we have left over compared to how much we have consumed in a given year. You will notice the downward trend, meaning we have less and less “extra” corn left over at the end of each year.
According to this data, we will have only 19 days of corn in storage this year and only 16 days of soybeans if we maintain the current pace of demand. For soybeans, this is the lowest stock-to-use ratio on record for the last 42 years; for corn it’s the second lowest.
Why is this? There are many reasons, but in a nutshell, food demand is growing fast. Our population is growing steadily, as is our demand for more calories per person. At the same time, we faced a record drought this year that depleted supplies, and we have been using more and more of our corn stocks to produce ethanol (up to 45 percent in 2011) as mandated by federal renewable-fuel standards.
The futures market is betting that weather will normalize and grain production will be huge in 2013. But if we get another drought as bad as 2012, the days of supply would dwindle to almost nothing in inventory. To keep that from happening, the prices of corn and soybean, the basis for very large portions of our total food supply in the U.S., would have to spike dramatically to kill demand, causing food inflation everywhere.
Sustainable America is working hard to increase domestic food availability through increased food production and decreased food waste.
