Supply and Demand Balance Sheet

The framework is deliberately simple, and its simplicity is what makes it usable across commodities and countries. Every item is a quantity over a marketing year for a defined geography, and the two sides must reconcile.

Opening stocks

What was carried in from the previous year. Note that this is the previous year’s ending stocks, so any error there propagates forward into this year’s account.

Production

What was harvested during the year. An estimate until the harvest is complete, and frequently an estimate afterwards too, since production is measured rather than counted.

Imports

What came in. Comparatively well observed where customs reporting is good, and subject to all the caveats that apply to reported trade statistics.

Domestic use

What was consumed, disaggregated by purpose — food, feed, processing, seed, and loss. The disaggregation is often less certain than the total.

Exports

What went out. Like imports, comparatively observable, and subject to the same reporting caveats.

Ending stocks

What remains at the year’s end. Structurally the most important item and usually the least directly measured — see below.

A marketing year, not a calendar year, is the accounting period, and marketing years differ by commodity and by country because they follow harvests. This means balance sheets for different countries or commodities may cover different periods, and aggregating or comparing them requires attention to what period each actually spans.

This is the single most important thing to understand about balance sheets, and it is a consequence of the identity rather than a flaw in anyone’s work. Most items in the account are estimated from some form of direct observation: production from surveys and remote sensing, trade from customs records, some use categories from industry reporting. Stocks are different. Stocks are held in millions of places — commercial elevators, processor inventories, on-farm storage, government reserves — and much of that is not reported to anyone.

Because the account must balance, ending stocks frequently function as the item that makes it do so. If production was overestimated and use correctly estimated, the surplus has to appear somewhere, and it appears as stocks. If use was underestimated, stocks absorb that too. The result is that the item everyone watches most closely — because stocks are what buffer a market against a shortfall — is often the item constructed by subtraction, carrying the accumulated error of every other item in the account.

• On-farm storage is substantial in many countries and is poorly observed almost everywhere
• Stocks held in some large producing and consuming countries are not published, so global figures contain estimates of what nobody has reported
• Because opening stocks are the previous year’s ending stocks, errors propagate forward and accumulate across years
• A revision to production or use in a prior year silently changes the stock position of every year since
• The disaggregation of use — food against feed against processing — is often more uncertain than the total, since the total is what the identity constrains

Given those weaknesses, it is worth being clear about why the framework is nonetheless indispensable. Its value is not in the precision of any individual figure. It is in the constraint: the identity means quantities cannot be considered in isolation, and a claim about one item is implicitly a claim about the others.

This makes a balance sheet a discipline on reasoning. An assertion that production will fall sharply is, through the identity, also an assertion that some combination of use falling, imports rising, or stocks drawing down must occur — and each of those has its own plausibility that can be examined. Claims that survive the identity are more serious than claims that ignore it, and the framework’s main contribution is forcing the question of where the quantity goes.

It is also the foundation for the stocks-to-use ratio, which relates the buffer at year end to the rate at which the commodity is consumed. That measure inherits every weakness described here, since it is computed from two items of the account, one of which is frequently the residual — a point worth carrying into any reading of it.