Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Southeast Asian markets have been a bright spot for DDGS exports this year as expanding demand is giving way to added market access. Thus far the trade has seen 110 percent and 100 percent YTD increases, respectively, in Vietnamese and South Korean imports of U.S. DDGS. Mexico’s imports of DDGS have been strong so far in 2016 as well, increasing 23 percent YTD. Further, July marked the third consecutive month-over-month increase in China’s DDGS imports from the U.S. this year, according to the latest Chinese customs data.
Flagging ethanol production is providing mild support to DDGS prices and buyers are actively procuring distillers grains as weak corn and soybean meal futures make feedstuffs purchases attractive. U.S. Rail rates for DDGS held largely steady this week with prices rising or falling $1/ton depending on destination. FOB prices to Canada experienced an increase for delivery through November. Across the Pacific, Asian prices fell modestly this week as DDGS are remaining competitive in the markets. Many containers for October or November delivery are discounted relative to September shipments, indicating upward price potential as those months become the spot month.
The biggest news in the export world this week is the bankruptcy of Hanjin Shipping. The company was ranked #7 in the shipping world and their receivership will impact the container freight market significantly.
Ethanol Comments: Ethanol margins are softer this week with higher stocks and lower demand outweighing production decreases. Ethanol production fell for a second week in a row with production coming in at 1.023 million barrels per day, down 5,000 from the prior week. Gasoline consumption is heading into its seasonal decline with the Labor Day holiday signaling the end of the summer driving season. Gasoline consumption moderated again this past week and reached 9.511 million barrels per day during the past week, a decrease of 140,000 barrels from the prior week.
The margin between the corn price and the value of ethanol and coproducts was lower this past week across the four reference markets (see below), while the spread versus this time last year continues to remain positive.
- Illinois differential is $1.86 per bushel, in comparison to $1.87 the prior week and $1.64 a year ago.
- Iowa differential is $1.82 per bushel, in comparison to $1.78 the prior week and $1.63 a year ago.
- Nebraska differential is $1.53 per bushel, in comparison to $1.43 the prior week and $1.45 a year ago.
- South Dakota differential is $1.90 per bushel, in comparison to $1.88 the prior week and $1.77 a year ago.