Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices are being pressured lower, possibly due to early spring warming reducing the energy requirements of livestock and thus feed demand. There was an average $10/container decline FOB Gulf this past week not reflected yet in export numbers. The average prices for 40-foot containers delivered to Asia in March were down $2/container or less, and showed no change for April/May delivery.
USDA’s Grain Crushing and Co-Products Production Report for March indicates that the making of DDGS and most other corn co-products was down in January, along with the lower production of ethanol. DDGS exports to China continue to slide with January’s total from the U.S. at 218,961 MT at a reported average value of $208.43/MT. U.S. sorghum and hay exports to China also fell in January, though they were at average or better levels for this time of year. Still, markets for DDGS remain diverse: Canada, Ireland, Israel, Spain, Thailand, Tunisia, Turkey, Vietnam and many other places around the world. DDGS exports to Mexico in January were healthy (195,669 MT), and the Vietnamese feed market continues to grow, including for DDGS.
Ethanol Comments: USDA reports that January’s production of ethanol was lower than December but the Energy Information Administration (EIA) says that last week’s ethanol exports were the second-largest ever, and exports for January (87.1 million gallons) were at the highest level in more than a year. China was a major buyer (29.4 million gallons).
Ethanol blending margins had been improving due to a steady market and firmer gasoline prices. In its March edition of the Short-Term Energy Outlook, the EIA slightly increased its projection for U.S. ethanol production in 2016 (0.6 percent) and 2017 (0.3 percent) versus its February forecast. It predicts rising prices for gasoline ($2.02/gallon by June).
USDA made one interesting change in its March WASDE report, lowering the 2014/15 grind for ethanol by 9 million bushels.
The margin between the corn price and the value of ethanol and coproducts fell (see below).
- Illinois differential is $1.36 per bushel, in comparison to $1.45 the prior week and $1.97 a year ago.
- Iowa differential is $1.20 per bushel, in comparison to $1.27 the prior week and $1.55 a year ago.
- Nebraska differential is $1.37 per bushel, in comparison to $1.46 the prior week and $1.41 a year ago.
- South Dakota differential is $1.34 per bushel, in comparison to $1.55 the prior week and $1.72 a year ago.