Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: U.S. DDGS exports are on track to reach a new record this year. The most recent USDA data shows U.S. DDGS exports are up 6 percent for the 2015/16 MY which, if continued, could put total marketing year exports near 12 million tons. Export volume of this magnitude would be very close to the record set in the 2013/14 MY.
The near record ethanol production this week failed to significantly dampen DDGS prices. Across all reported destinations, prices rose $1/ton this week with prices for rail delivery to the PNW strengthening the most at $6/ton. Prices for product destined for the U.S. Gulf or NOLA moderated from last week’s strong gains but are underpinned by sellers maintaining offers at 100 percent of corn value. Market strength was also observed for Asia-destined containers with an average price increase of $2/ton. Prices for October delivery increased the most with containers to the Philippines and Indonesia increasing $5/ton over the prior week.
Some merchandisers are reporting stronger demand in the rail and export markets which is likely to buoy prices for spot delivery at least. DDGS prices are competitive with corn and soybean meal in many feed rations right now which is prompting buyers to ask for forward prices. Sellers, however, anticipating good winter demand and slowing ethanol production are reluctant to book very far in advance. Export demand remains the wild card in the pricing outlook but exports have been consistently strong and may help overcome any remaining bearish sentiment from the large corn crop.
Ethanol Comments: Ethanol production this week nearly tied the record high for a second week in a row. Weekly production reached 1.028 million barrels, 1,000 barrels short of tying the record 1.029 million barrels produced last week. The breakneck pace of ethanol production in the past two weeks has pushed stocks higher to 20.817 million barrels. Gasoline consumption moderated somewhat this past week as the start of school in some areas signals the end of summer driving demand. U.S. gasoline consumption reached 9.659 million barrels per day during the past week, a decrease of 100,000 barrels from the prior week.
The margin between the corn price and the value of ethanol and coproducts was mixed this past week across the four reference markets (see below), and the spread versus this time last year was higher for Illinois and South Dakota but modestly lower for Iowa and Nebraska.
- Illinois differential is $1.87 per bushel, in comparison to $1.89 the prior week and $1.77 a year ago.
- Iowa differential is $1.78 per bushel, in comparison to $1.72 the prior week and $1.81 a year ago.
- Nebraska differential is $1.43 per bushel, in comparison to $1.45 the prior week and $1.48 a year ago.
- South Dakota differential is $1.88 per bushel, in comparison to $1.80 the prior week and $1.82 a year ago.