Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Falling Midwest temperatures are increasing demand for DDGS in domestic livestock rations and a blizzard forecast for northern parts of the corn belt will help increase near-term demand. Compared to domestic soybean meal prices, DDGS prices on a per unit of protein basis were lower this week which will continue garnering interest from the livestock industry. Reports are surfacing that carriers are pushing GRI’s into December but ample supplies at container depots may limit this effort. Even as domestic demand is picking up, international purchasers remain more interested in value-buying. Their strategy may be tested as some large bulk buyers are bringing bulk vessels to NOLA which will certainly support the market. Demand for Asian destinations has been quiet this week but some Chinese buyers are looking for spot shipment opportunities.
The tension between higher domestic demand and somewhat softer international interest is evident by prices that are relatively unchanged this week from last. Prices for DDGS CIF New Orleans fell $2/ton this week while FOB Gulf prices were unchanged for December shipment and $1/ton higher for January. Spot shipments to Southeast Asia were higher in general while January shipment prices slipped, giving value-seeking international buyers ample opportunity to fill their needs.
Ethanol Comments: The U.S. Energy Information Administration (EIA) updated its 2017 ethanol supply and demand forecast this week, predicting an increase in production for the coming year. EIA is forecasting average production of 990,000 barrels per day in 2017, up from 970,000 in 2015. Projections for fourth quarter 2016 production were revised to 990,000 barrels per day, down from an average of 1.01 barrels during 2016’s third quarter.
Ethanol margins were stable to slightly weaker this week as production rose 15,000 barrels from the prior week to 1.017 million barrels per day. Ethanol stocks fell 3 percent from the previous week and are at their lowest level since at least September at only 18.609 million barrels. The stocks decrease came in the face of a 4 percent (842,000 barrel) decrease in ethanol consumption, implying exports last week were strong.
The margin between the corn price and the value of ethanol and coproducts was essentially unchanged this past week across the four reference markets (see below). Compared to this same week last year, the spread is roughly $0.50 higher in all reference markets.
- Illinois differential is $2.20 per bushel, in comparison to $2.17 the prior week and $1.75 a year ago.
- Iowa differential is $2.08 per bushel, in comparison to $2.05 the prior week and $1.49 a year ago.
- Nebraska differential is $2.15 per bushel, in comparison to $2.22 the prior week and $1.71 a year ago.
- South Dakota differential is $2.26 per bushel, in comparison to $2.27 the prior week and $1.73 a year ago.