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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities

In agricultural commodity analysis, the 'stocks-to-use ratio' is best interpreted as:

The stocks-to-use ratio is ending stocks divided by total consumption. A lower ratio means a thin buffer against shocks, indicating tight supply, which generally supports higher and more volatile prices, whereas a high ratio signals ample supply and softer prices.

  1. AEnding stocks divided by total consumption; a lower ratio generally indicates tighter supply and supports pricesCorrect
  2. BEnding stocks divided by total consumption; a lower ratio generally indicates surplus and depresses prices
  3. CProduction divided by area sown; a higher ratio indicates higher prices
  4. DExports divided by imports; a higher ratio indicates a surplus

Explanation

Stocks-to-use compares carryover stocks to usage. A low ratio means little buffer against demand or supply shocks, so prices tend to be higher and more volatile. A high ratio signals comfortable supply and weaker prices.

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