Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices are higher in light trading, despite continued weakness in corn futures. FOB ethanol plant prices rose to $112.34/ton, putting DDGS at 100 percent of cash corn values and 39 percent of Kansas City soybean meal. Both ratios are up from last week.
On the international front, prices for DDGS FOB U.S. Gulf were essentially steady, gaining $0.25/MT to end at $174.25/MT. This came despite a $1.50/MT decrease in Barge CIF NOLA values. FOB Gulf DDGS prices gained versus falling FOB corn prices, leaving the DDGS/corn price ratio at 101 percent. This is only the second time in 2017 the ratio has been above 100 percent, and DDGS still appear undervalued relative to historic norms.
CNF prices to Southeast Asia were mixed this week, gaining $1/MT on average. Prices for 40-foot containers to Japan and the Philippines increased, with smaller gains in other markets. Given the light trading that has occurred so far, it is likely international buyers are waiting for corn prices to stabilize and provide direction for DDGS before purchasing.
DDGS production for the 2016/17 marketing year is projected to increase 4 percent from last year, ending at 37.3 MMT. Based on the outlook for greater ethanol production in the 2017/18 marketing year, DDGS production will rise commensurately, reaching 37.6 MMT. According to the USDA ERS, 73 percent of DDGS are consumed domestically while the rest are exported. Given growing DDGS production and the financial pressure that is building for livestock producers in the U.S., DDGS exports will likely increase, both in volume and as a share of production, in 2017.