Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: The DDGS market is stabilizing; taking a breather from its upward move last week. Ethanol plants have good margins through year’s end and are locking in corn purchases and DDGS sales for this period, along with some Q1 2017 sales as well. Last week’s pop in soybean meal prices pulled DDGS higher as well which gave decent forward selling opportunities. Prices were stronger earlier this week and have since moderated somewhat in a reversion to what seems to be the new normal. Prices for November and December shipment to U.S. destinations are $5/ton higher on average this week with FOB Gulf and PNW prices leading the way. Merchandisers are reporting much of the U.S. trade is pushing DDGS to the river/barge or domestic truck market as values are getting more competitive. Prices for international shipments are mixed with strength in some Southeast Asian markets being offset with weakness in others. On average, prices are firm, up $1/ton over last week.
USDA recently reported a 5 percent month-over-month decrease in DDGS production during September. The report calculated 1.96 million tons of DDGS were produced in September, down from 2.07 million tons in August. The production shortfall has reduced the volume of DDGS available to sell and contributed to stronger prices last month.
A presentation at a recent industry conference highlighted the broad-based benefits of feeding DDGS to livestock. A swine nutritionist noted DDGS have benefits including reducing methane emissions in dairy cows and, because DDGS have natural antioxidants, improving animal health without using antibiotics. Additionally, inclusion in livestock rations offers environmental benefits including reducing hydrogen sulfide and ammonia in piglet manure and reducing algae growth in lakes and rivers downstream of livestock operations. The latter effect occurs because DDGS have the highest digestible phosphorus of any livestock feedstuff.
Ethanol Comments: Higher ethanol margins encouraged plants to increase production by 11,000 barrels per day from last week (1 percent), with production reaching 1.002 million barrels per day. Ethanol stocks fell 180,000 barrels this week (-1 percent) even as gasoline consumption fell 3 percent (581,000 barrels per day) this week. Exports, after lagging in the prior week, returned with strength this week and drove the ethanol stocks reduction even as domestic consumption fell.
U.S. ethanol exports have been strong this year (up 8 percent YTD), aided recently by reductions in Brazil’s export program. Traders are noting this week that Brazilian exporters are suspending sales to Asia, preferring to keep product for their own domestic market which is experiencing surging prices. The global dynamics may explain why U.S. ethanol exports to China were up in August, totaling 5.71 million liters. August’s exports mark a dramatic increase from July’s paltry 25,000 liters.
The margin between the corn price and the value of ethanol and coproducts was higher this past week across all four reference markets (see below). Compared to this same week last year, the spread is roughly $0.40 higher in all reference markets.
- Illinois differential is $2.15 per bushel, in comparison to $2.12 the prior week and $1.86 a year ago.
- Iowa differential is $2.06 per bushel, in comparison to $1.98 the prior week and $1.60 a year ago.
- Nebraska differential is $2.16 per bushel, in comparison to $2.08 the prior week and $1.78 a year ago.
- South Dakota differential is $2.24 per bushel, in comparison to $2.16 the prior week and $1.79 a year ago.