Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: The DDGS market has a decidedly mixed tone this week: Prices in the Eastern Corn Belt have retreated modestly while Chicago, IL prices are up $10/ton. Western Corn Belt prices were steady this week but could see an increase next week with some cold weather. The cold front across the Rocky Mountains and Midwest plains this week will certainly increase feeding demand for DDGS and Western Corn Belt producers stand to see demand increase. The 11-cent weekly gain in CBOT corn prices will also encourage the purchase of DDGS which now stand at 34 percent of corn prices. DDGS are also remaining very competitive against soybean meal, priced $2.32/protein unit under their soy-derived competitor.
The latest grain crushing’s report from the USDA noted that October DDGS production was down slightly from September. October production came in at 1.93 MMT and the continued strength in ethanol production means monthly DDGS supplies will be near 2 MMT for November and likely December also.
The latest export data also shows exports of U.S. DDGS increased in October, gaining 1 percent to total 1.005 MMT. Mexico was the largest destination for DDGS in October, buying 131,000 MT – an increase of 7 percent from September.
Ethanol Comments: Ethanol production continues to impress, gaining 11,000 barrels per day (1.1 percent) this week to total 1.023 million. This marks the sixth straight week production has exceeded 1 million barrels per day, the longest such streak in history. The added production expanded ethanol stocks this week which totaled 18.53 million barrels, up 0.4 percent from the week prior. Cold weather in parts of the country and the end of the Thanksgiving holiday travel season left gasoline consumption down 3 percent this week. Ethanol stocks were up only slightly while gasoline consumption was down, implying exports remain strong for U.S. ethanol producers.
The strength of the U.S. ethanol export program this year is especially evidenced by the five-year record high that was achieved in October. Earlier this week, the USDA noted October ethanol exports totaled 131.6 million gallons, up 32 percent from September and 69 percent from August. Shipments to Brazil and Canada were especially strong with Brazil importing an additional 25 million gallons from September’s baseline and Canadian imports climbing 25 percent. To date, Canada, Brazil, and China are vying for the top export destination for U.S. ethanol.
Ethanol margins were broadly higher again this week and increased in three of the four reference markets, though gains were smaller than last week’s. Ethanol producers in South Dakota saw the only decrease in margins, losing $0.08/bushel this week, though their margins are nearly $1.00/bushel higher than last year. Margins in other states were higher, with Nebraska seeing the largest increase at $0.11/bushel. Margins remain extremely strong against year-ago levels, averaging $0.69/bushel higher across the Midwest.
- Illinois differential is $2.23 per bushel, in comparison to $2.17 the prior week and $1.67 a year ago.
- Iowa differential is $2.07 per bushel, in comparison to $2.04 the prior week and $1.43 a year ago.
- Nebraska differential is $2.25 per bushel, in comparison to $2.14 the prior week and $1.61 a year ago.
- South Dakota differential is $2.41 per bushel, in comparison to $2.49 the prior week and $1.50 a year ago.