Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices worked their way higher this week as higher corn and soybean meal futures gave merchandisers room to increase offers. Fresh buying interest came mid-week as international buyers sought to secure supplies ahead of further price increases.
Recent sales and flagging ethanol production have significantly tightened June and July DDGS supplies. Merchandisers (and this publication) have been noting tight June supplies for several weeks but the tightness has now extended into July shipments. Some traders are attributing supply tightness to lower old crop corn availability, but others claim this is merely a “talking point” rather than an actual driving factor.
Kansas City soybean meal prices are $5/MT higher this week while FOB ethanol plant DDGS prices were steady. Consequently, DDGS moved to a $1.94 cost advantage (on a per-protein unit basis) against soybean meal. Domestically, DDGS are prices at 85 percent of cash corn values, a 1 percent gain from last week and still historically undervalued.
FOB Gulf prices are $1-5/MT higher this week (averaging $161/MT), bringing the DDGS/corn value ratio to 101 percent. This week marks the first time this metric has been above 100 percent since early December 2016. On a per-protein unit basis, FOB Gulf DDGS are $0.60 cheaper than FOB soybean meal, the latter having fallen price despite higher futures.
Internationally, new importers have been looking to secure U.S. DDGS for ports including Taiwan, Colombia, Indonesia and Bangladesh but merchandisers are reporting prices and volumes are low (less than 500 MT and bids $10 under market trades). Prices for 40-foot containers destined for Southeast Asia were $5/MT higher on average, led by a $5/MT gain in Japan and Philippines prices.