Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Mexico, China and Vietnam were all large buyers of U.S. DDGS in the past months, each purchasing 159 TMT, 370 TMT and 95 TMT, respectively. The increased buying interest by China and Vietnam highlights the growing importance of Asian markets for U.S. DDGS producers and exporters.
Given the second largest ethanol production week on record this week, DDGS buyers will have ample access to supplies. U.S. corn exports, nearing the end of their season, may slow down and give more room for DDGS on the U.S. rail and barge network. Container exports were reported to be maintaining a steady pace since July despite some minor slowdowns. Prices for FOB Gulf and U.S. rail slots largely stabilized this week while prices for September shipment to Southeast Asia destinations turned higher. The modest weekly price movement in corn this week has help stabilize DDGS prices and any upward price momentum from tomorrow’s WASDE report will likely boost DDGS prices.
Ethanol Comments: The EIA reported a third consecutive year of ethanol production capacity growth for the United States. In January 2016, estimated annual production capacity was 15 billion gallons per year (973,000 barrels per day), a capacity increase of more than 500 million gallons from 2015. The EIA measures production capacity by nameplate capacity (the plant manufacturer’s stated design capacity), which may be lower than a plant’s physical production capacity. Accordingly, total production in 2015 was 14.8 billion gallons, exceeding EIA’s estimated production capacity figures for the year.
U.S. ethanol export volumes remained strong in 2015 even as export values dipped 14 percent on lower prices. Ethanol exports in 2015 reached 836 million gallons, unchanged from 2014 and down from the record reached in 2011. The U.S. share of global ethanol exports remained steady at 50 percent as lower prices and more diverse export destinations helped sustain export volumes. The top five markets accounted for 79 percent of U.S. ethanol exports in 2013 but only 68 percent in 2015. Much of the change was driven by smaller markets, South Korea and India in particular, becoming more important.
Ethanol production climbed to near-record highs this past week at 1.018 million barrels per day, an increase of 14,000 barrels per day over the prior week. Despite production growth, ethanol stocks fell by 143,000 barrels as weaker gasoline prices across the U.S. spurred usage. Fuel ethanol stocks finished the week at 20.406 million barrels.
The margin between the corn price and the value of ethanol and coproducts was once again lower this past week in all of the four reference markets (see below), and the spread versus this time last year continues to widen.
- Illinois differential is $1.72 per bushel, in comparison to $1.85 the prior week and $1.84 a year ago.
- Iowa differential is $1.64 per bushel, in comparison to $1.84 the prior week and $1.77 a year ago.
- Nebraska differential is $1.37 per bushel, in comparison to $1.52 the prior week and $1.44 a year ago.
- South Dakota differential is $1.70 per bushel, in comparison to $1.86 the prior week and $1.86 a year ago.