DDGS prices worked their way higher this week as tighter ethanol margins and transportation carriers’ new alliances created pricing opportunities. Traders also booked some tonnage forward as a hedge against any possible summer marketing slowdown. Improved marketing opportunities came from corn futures’ price bump but lack of sales-driven demand limited gains.
Merchandisers are reporting quiet export demand with bids $5-8/MT below asking prices. Prices for deferred delivery months are rising, though it is unclear whether this is demand driven or merchandisers’ effort to drive purchases in the nearby month. Alternatively, input pricing may require higher asking prices to manage ethanol production margins.
DDGS’ value relative to corn is still extremely low by historic standards. The ratio of cash corn and FOB ethanol plant DDGS prices is 84 percent this week while the ratio of FOB NOLA prices equal 105 percent. The FOB Gulf ratio has been below 110 percent for the entirety of 2017, whereas it averaged 114 percent during 2016. Compared to soybean meal, FOB ethanol plants DDGS have a $2.29 per protein unit cost advantage this week and a $1.49 advantage FOB NOLA. Judged by the relative value of competing feedstuffs, DDGS appear to have potential to continue moving higher even as ethanol/DDGS production picks up from its seasonal spring lull.