Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices were mixed this week, with the sharply higher corn and weakening soybean meal markets offering conflicting influences for DDGS. Prices reported by the USDA (FOB ethanol plants) were $1/short ton higher this week, while USGC’s reported FOB NOLA prices were lower. DDGS (FOB plant) stand at 31 percent of corn futures value, the same as last week, while FOB NOLA DDGS are at 40 percent of FOB corn, down from the week prior. Cooler Midwest weather across the plains states this week is likely increasing feed demand for DDGS while a higher dollar and Brazil’s Carnival celebration may be tempering international demand.
International prices have been competitive this week as merchandisers seek to move inventory. Prices for 40-foot containers to Asia were down $5/ton on average this week, though prices to Japan climbed $3/ton. On a per-protein unit basis, DDGS are still highly competitive against soybean meal. FOB plant DDGS have a $2.87 advantage against soybean meal this week while, on the export front, FOB NOLA DDGS have a $1.94 cost advantage.
Ethanol Comments: Weekly ethanol production was steady this week as ethanol stocks continued to grow and ethanol margins improved only modestly. Ethanol production last week was 1.034 million barrels per day, equal to the week prior, while ethanol stocks reached 23.09 million barrels; approaching its seasonal peak. The spring driving season tends to quickly draw down ethanol stocks and this year’s mild winter and apparent early spring will likely hasten the stock reduction. From a demand standpoint, these factors should create upward pressure on ethanol prices, buoy production margins, and allow producers to continue their impressive output numbers.
Ethanol production margins were essentially steady across the four reference markets this week, with 4-7 cent gains in Illinois, Nebraska, and South Dakota, and a penny loss in Iowa. Across the U.S., margins were $0.40 per bushel higher this week but are still below year-ago levels by $0.12. The spread between futures-implied ethanol production margins and Iowa cash margins narrowed somewhat this week but remains abnormally strong compared to the past two years. The strength in the futures-implied margin is likely signaling better times ahead for producers, which will further encourage production.
- Illinois differential is $1.45 per bushel, in comparison to $1.41 the prior week and $1.58 a year ago.
- Iowa differential is $1.34 per bushel, in comparison to $1.35 the prior week and $1.47 a year ago.
- Nebraska differential is $1.62 per bushel, in comparison to $1.58 the prior week and $1.82 a year ago.
- South Dakota differential is $1.95 per bushel, in comparison to $1.88 the prior week and $1.96 a year ago.