Question

The stock-to-use ratio for wheat has declined from 120% to 80%. What do you expect will happen to wheat price?

Answer 1

The stock-to-use ratio indicates the level of stock of a commodity that has to carry forward to the next time period with respect to the total quantity of commodity.

This ratio relates the supply with demand in quantitative terms.

A decrease in this ratio implies that less stocks will be carried forward to next time period and thus supply would decrease relative to demand in next time period.

So,

If stock-to-use ratio of wheat declines from 120% to 80% then supply of wheat will decrease.

Given the demand for wheat, this decrease in supply of wheat will lead to increase in price of wheat.

So,

The wheat price will increase.