Crop Demand and Price Development
Key factors affecting the crop protection market are farmer wealth and confidence, which are greatly affected by the crop prices and margins that farmers achieve from their crops. Profitability of each crop in a given year influences not only farm solvency, optimal input decisions and preferences on technology, but also the choice of crops that a farmer will produce the next season. Therefore, the development of crop markets and price trends in a season can give a good indication of how the market will progress in the next year.
One of the widely used indicators for price determination is the stock-to-use ratio (STU), which measures the level of carryover stocks as a percentage of the total consumption. STU has inverse correlation with the price, meaning that if STU goes down, the price goes up. The chart above displays the most recent STU estimates from Informa Economics Group (IEG), a sister organisation to Phillips McDougall, as well as historical data.
Despite higher production, in 2018 STU of maize is expected to decrease sharply, driven by increased industrial and feed consumption significantly outpacing the production growth. Wheat and cotton STU are also forecast to decline, mainly due to lower production along with growing consumption, while rice and soybean STU show a moderate increase. During 2019/20 and 2020/21 the STU for all major crops, except for cotton, are forecast to decline, resulting in higher crop prices...
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