Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Merchandisers report that buyers are seeking lower prices because of declining new crop futures contracts, particularly for the August/September time period. However, substantial price declines are not happening at the moment because the current spot price for corn remains high. That fact was made evident today as the nearby July corn contract traded up more than 5 cents, while the December closed down over 10 cents.
Both buyers and merchandisers agree that there finally seems to be some light at the end of the tunnel. In the interim, prices continue to trade sideways to a little lower. Moderate Chinese buying occurred with sales to Haiphong at $368/MT for 500 MT and to Nansha at $361/MT for 2,000 MT. There was also a sale of 100 MT to Ho Chi Minh City at $366/MT.
Ethanol Comments: According to Bloomberg this week, ethanol’s widening discount to gasoline is based on speculation that current price levels will attract ethanol imports. While imports of sugar-based ethanol from Brazil are likely to increase this summer, there is still no evidence that such imports will be large enough to cause a pronounced rebuilding of stocks, and on the contrary, ethanol imports fell back to zero for the week ending June 28. Nor were the prior week’s imports of 38,000 barrels per day (bpd) sufficient to offset the declines in domestic ethanol production that caused a further decline in total stocks.
Domestic U.S. ethanol production for the week ending June 28 was 863,000 bpd, which was a 2 percent decline from the prior week’s production of 885,000 bpd. The current U.S. production rate is similar to last year’s level of 857,000 bpd. However, the current total ethanol stocks level of 15.4 million barrels is about 24 percent less than the level seen this time last year of 20.3 million barrels. Further, the trend is down from the week-ago level of 16.3 million barrels. Stocks commonly decline going into the fall.
Supporting the notion that the sky is not falling is the fact that there was an improvement in three of the four USDA reported differentials between processing product values and corn prices:
– Illinois differential decreased to $2.13 per bushel, which is down from $2.20 the prior week but above $1.58 last year.
– Iowa differential increased to $2.04 per bushel, which is up from $1.86 the prior week and above $1.12 last year.
– Nebraska differential increased to $1.96 per bushel, which is up from $1.78 the prior week and above $1.08 last year.
– South Dakota differential increased to $2.36 per bushel, which is up from $1.98 the prior week and above $1.65 last year.