Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: China’s DDGS purchases have heretofore been tempered but that may have to change. Reports indicate that corn being sold out of China’s reserves is disappointing quality-wise and that feed mills are boosting their purchases of sorghum and DDGS in response. Indeed, China reportedly imported 2.94 MMT of feedstuffs (one-third of which was corn, plus DDGS, cassava, etc.) in May. The value of quality corn is rising while the price of poorer quality corn coming out of stocks is being forced to fall in order to be competitive with the fully landed cost of corn imports. One report suggested that future Chinese corn plantings will decline in favor of growing vegetables due to their rising value. Meanwhile, Southeast Asia remains a booming market for DDGS, taking advantage of low-cost container shipping rates, but some buyers are hoping for lower prices ahead. Korea was reportedly in the market this past week.
DDGS prices for August delivery declined this past week by an average $14.00/container. They also declined for September shipment, but by a much smaller $0.75/container average. The bulk of the declines were in destination markets, with U.S. domestic transfer points reporting only small declines and even a $3/container increase for FOB Gulf. This indicates that any more near-term declines at destination markets may also be smaller. The fall back in price was obligated by falling corn futures prices and will enable DDGS to be more competitive on a delivered basis.
Ethanol Comments: Ethanol margins have been satisfactory, incenting aggressive run times and so daily U.S. ethanol production rebounded this past week by 40,000 barrels per day and pushed average production per day back up over one million barrels. Stocks levels squeaked slightly higher by 21.2 million barrels.
The margins between the corn price and the value of ethanol and coproducts bounced around this past week (see below), depending on the market, but remain above levels recorded this time a year ago.
- Illinois differential is $1.92 per bushel, in comparison to $1.93 the prior week and $1.80 a year ago.
- Iowa differential is $2.03 per bushel, in comparison to $1.92 the prior week and $1.70 a year ago.
- Nebraska differential is $1.67 per bushel, in comparison to $1.66 the prior week and $1.51 a year ago.
- South Dakota differential is $2.09 per bushel, in comparison to $2.13 the prior week and $1.84 a year ago.