Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Trade volume has been light this week with an unreported but significant number of traders attending the National Grain and Feed Association conference. Despite the widespread conference attendance, however, interesting developments occurred this week in the DDGS market. The export container market remains under domestic pricing influences while the barge market is beginning to pressure logistics operators upstream. Merchandisers are reporting barge rates are exerting negative pricing pressure on transloaders, rail operation, and truckers. However, CIF NOLA barge rates recovered $1/MT this week to $136. Despite continued historically strong ethanol production, merchandisers are expecting DDGS prices to firm heading in to April and May as ethanol plants will slow operations for spring maintenance.
On the export market, FOB Gulf DDGS are trading steady with last week at $146/MT; roughly 91 percent of FOB corn values, up 1 percent from last week. Similarly, DDGS are at 41 percent of FOB soybean meal offers (up 1 percent) which narrows DDGS’s per-protein-unit cost advantage slightly. The per-protein-unit cost of DDGS is $1.64 less than that of soybean meal (both quoted FOB Gulf), down $0.27 from last week. To some extent, lower soybean meal prices are pressuring DDGS offers but corn will continue to exert a larger influence going forward. Despite merchandisers’ expectations for stronger prices into April/May, the forward curve for export DDGS prices shows a -$2/MT change from April to May. One could argue, however, that the current shape of the curve simply means there is more room for export prices to increase this spring.
Internationally, prices had a softer tone this week largely due to quiet trading in general. Prices for Southeast Asia-destined containers fell $3/MT on average with the largest declines coming from Japan. Moderate pricing strength came from Malaysia and South Korea. For now, it seems export prices will be largely steady in the next few weeks, caught between satiated global demand and U.S. merchandisers defending their offers.