Supply and demand are essential factors that determine prices, and the "supply and demand balance table" that demonstrates the relationship between supply and demand has become an indispensable tool for studying price changes. So how do you look at the supply and demand balance table?
1
First look at the composition of the supply and demand balance table
In general, the supply and demand balance table has three major components: Total supply, total demand, and end-of-term inventory. The relationship between the three is:
Total supply-total demand=end-period inventory
Total supply includes three more: The beginning inventory (i.e. the end inventory of the previous period), output, and import volume.
Total consumption includes two parts: Domestic consumption and export volume.
List these 6 items in the table in turn to form a supply and demand balance table. The content listed in the
table is not limited to these 6 items, and can be appropriately added and decreased according to the characteristics of the variety. For example, the soybean balance table also lists crush consumption, edible consumption, etc.
2
What should I think after I get such a table? The balance table of cotton above
can be followed as an example, and the order from top to bottom and right to left can be viewed. From top to bottom, what we see is the supply and demand situation in a certain cycle. From right to left, it is a change, compared to the previous period, or the previous estimate.
For example: From top to bottom, it can be seen that in 2022/23, it is expected that 7.13 million tons of cotton (carried forward from the previous year), cotton 5.86 million tons of are imported 2.05 million tons , domestic consumption 7.85 million tons , export 30,000 tons , and final balance 7.16 million tons .
From right to left, it can be seen that the forecast data for 2022/23 in October has no change from the forecast made in September, except for the beginning inventory and the end inventory. The reason why inventory changes at the beginning and end of the period is because the data estimates for 2021/2022 have been adjusted, resulting in the 2021/2022 balance from the previous 7.16 million tons to the current 7.13 million tons .
In addition, it can be seen that compared with 2022/2023, the sowing, harvested area, and yield have increased, output and import volume have increased, consumption has decreased, and exports have remained unchanged.
Of course, these are all the most basic and not difficult. Among the bunch of data of the balance table, the most important thing is " end-of-term inventory ", which is the balance. Because this is the ultimate reflection of whether supply and demand are loose or tight. Generally speaking, the large surplus of indicates that supply and demand is loose; the surplus is small, or even no surplus or the surplus is negative, indicating that supply and demand are tight.
However, just looking at the end of the period is easy to be misleading. Because, the supply and demand of some varieties are large in themselves. Looking at a large end-of-term inventory data, it may be very small compared to the demand. Therefore, in order to better reflect the supply and demand of goods, the indicator " inventory consumption ratio " was introduced.
3
What is inventory consumption ratio?
Inventory consumption ratio refers to the ratio of inventory to demand, and is an indicator to measure the level of food security proposed by the Food and Agriculture Organization of the United Nations. Therefore, this statement is often seen in agricultural products. Of course, other fields are using this indicator.
Inventory consumption ratio = End of inventory/demand
Inventory consumption ratio declines, indicating that there is a trend of tight supply and demand, while an increase indicates that there is a trend of loose supply and demand. Generally speaking, all industries will formulate their own reasonable inventory consumption ratios.
For example, cotton, it is usually believed that when the inventory consumption ratio at the end of the period is around 30%, the market will behave in a basic balance of supply and demand. If it is less than 30%, the market will be in short supply, while if it is too much higher than 30%, it will show a pattern of oversupply.
In addition, "end-term inventory" is the "start-term inventory" of the next cycle. Therefore, begin-term inventory is also very important , especially when analyzing those storage-resistant agricultural products, metal products, and energy chemicals.
Finally, I would like to emphasize one more thing. Before the end of a cycle, the data of the balance table are all estimated and are dynamically adjusted . For example, the US USDA report that the market is paying attention to every month, it makes adjustments every month and then releases it. For example, the supply and demand forecast of major agricultural products by the Ministry of Agriculture and Rural Affairs of my country also makes a monthly estimate.
Now, do you look at the supply and demand balance table?
