Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: The U.S. EPA’s announced ethanol blend requirements for 2014-2015 received mixed reactions for being below statutory levels but above those proposed in May. The mandate for 14.05 billion gallons in 2015 is 4.85 percent above the proposed level in May and the 14.5 billion gallons mandated for 2016 is up 3.57 percent. This will in turn build the supply of DDGS; the premium presently being earned by ethanol in the market means that DDGS will continue to have an advantage over feed mills.
DDGS exports were down in September, but were still up by nearly 30 percent for the first nine months of the year versus 2014. While some parts of the world are quiet, demand is picking up. Sales of 2,000 MT were made to Korea at $206/MT for January shipment, and Vietnam is in play for a shipment at a slightly higher price. In fact, the real story is that prices have stabilized – no longer moving about wildly.
This past week saw some softening in container prices to Asia but a firmer basis for rail and FOB cargoes out of the PNW. The wider swings included a drop in the price of a 40-foot container to Shanghai, and an increase in rail delivered to the U.S. west coast.
Ethanol Comments: U.S. ethanol production was at 956,000 barrels per day (bpd), a slight drop from the average one million bpd during the two prior weeks. Nonetheless, ethanol stocks climbed by 1.9 percent to 20 million barrels as imports provided an additional 32,000 bpd on average.
Note that the U.S. EPA’s ethanol mandate announcement for 2016 assumes exports at 750,000 gallons. Ethanol has been priced at a premium to gasoline for three months now due to export demand and this dynamic is likely to continue into 2016.
Ethanol makers in China continue to lose money trying to convert higher-priced corn ($320/MT versus $311.60/MT a week earlier) into ethanol priced below $820/MT, and dropping. Meanwhile, for the week ending December 3, 2015 the differential between the price of corn and co-products averaged only 2 cents compared to the prior week for the four regions of the Corn Belt.
- Illinois differential is $1.75 per bushel, in comparison to $1.70 the prior week and $3.73 a year ago.
- Iowa differential is $1.43 per bushel, in comparison to $1.46 the prior week and $4.18 a year ago.
- Nebraska differential is $1.59 per bushel, in comparison to $1.59 the prior week and $4.28 a year ago.
- South Dakota differential is $1.73 per bushel, in comparison to $1.67 the prior week and $3.42 a year ago.