Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS trading has been slow this week as market participants, who were waiting on the results of Monday’s USDA data, decided to continue waiting due to the reports’ bearish contents that continue to drive prices lower. DDGS buyers will stand back so long as corn prices appear to be headed lower. Domestic buyers are the largest consumers of DDGS, and their restrained action has resulted in domestic bulk rates of DDGS declining by as much as $20/MT in two days.
The price of containerized DDGS in the export market suddenly dropped an additional $6.00/MT for shipment out through September. The containerized export rate of DDGS did not drop as dramatically as the domestic bulk rates because increased competition for containers to specific destinations can partly offset the reduction in DDGS prices. Demand growth is occurring as lower prices encourage domestic and foreign buyers to increase the percentage of DDGS within feed rations.
Ethanol Comments: Relative stability in the price of crude oil and sinking corn prices increases the prospects for growth in ethanol exports due to attractive pricing in comparison to gasoline. While weekly data released by the Energy Information Agency (EIA) does not monitor ethanol exports, the stock levels are monitored. Any export flow will influence the level of total stocks. Such evidence has not yet materialized. Total U.S. ethanol stocks for the week ending June 27 remained unchanged at 18.2 million barrels. The positive fact is total stocks have leveled off while average daily production increased slightly to 953,000 barrels per day (bpd), above the prior week’s level of 938,000 bpd. The more negative fact is that total ethanol stocks are 17.9 percent above the year-ago level of 15.4 million barrels. Further growth in the year-to-year percent changes of stocks is expected to increasingly weigh on ethanol prices, if ethanol exports do not act as a pressure relief valve.
This week’s substantial sell-off in corn prices will have a positive influence on the spot differential between ethanol and co-product processing values across the U.S. Corn Belt. However, those values will not be released for the week ending July 4 due to the holiday; those values will be published next Friday.