Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Despite a quiet week of trading, the market is feeling some support. The soybean market was highly supportive early in the week while cold weather in the Midwest is helping accelerate feed demand. FOB DDGS values are at approximately 123 percent of corn futures and are competitive against soybean meal in livestock rations. International demand is picking up from the holiday-quieted trading last week and vessels have been sold to several Asian destinations including Japan, South Korea, and China.
The fundamentals are directly supporting DDGS prices. Prices were slightly higher for barges CIF NOLA this week, adding an average of $1/ton while for rail delivery to the PNW, prices rose $3/ton for December shipment and California-destined DDGS gained $1/ton. International prices saw broad strength as well, with 40-foot containers to Southeast Asia gaining $7/ton on average. Interestingly, prices for January shipment increased $5/ton while February shipment prices increased $8. The trend may be indicative of future strength in international DDGS demand.
Ethanol Comments: Ethanol production remains well above year-ago levels despite slipping 3,000 barrels from the prior week. Since the marketing year began, cumulative production is up 4 percent YTD while stocks have fallen 8 percent. The implication is that export and domestic demand have both been robust and likely exceed USDA’s projections. By some estimates, USDA’s current projection for corn used in ethanol production may be 25-50 million bushels too low.
Ethanol margins were broadly higher again this week and increased in three of the four reference markets. Ethanol producers in Iowa saw the only decrease in margins, losing $0.08/bushel this week. Margins in other states were higher, with South Dakota seeing the largest increase at $0.17/bushel. Margins remain extremely strong against year-ago levels, averaging $0.63/bushel higher across the Midwest.
- Illinois differential is $2.17 per bushel, in comparison to $2.09 the prior week and $1.75 a year ago.
- Iowa differential is $2.04 per bushel, in comparison to $2.12 the prior week and $1.43 a year ago.
- Nebraska differential is $2.14 per bushel, in comparison to $2.07 the prior week and $1.59 a year ago.
- South Dakota differential is $2.49 per bushel, in comparison to $2.32 the prior week and $1.56 a year ago.