Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: A recent University of Nebraska-Lincoln (UNL) study shows beef producers are finding new ways to use DDGS in feed rations. The report highlighted that changes in the efficiency of ethanol plants to extract corn oil from the grain has given way to slight changes in DDGS nutritional content. In response, beef producers have been adjusting DDGS inclusion rates and one company developed a pellet composed of distiller’s grain and calcium oxide-treated corn stover to replace corn in feed lot rations. The UNL study (available here) found that feeding DDGS increased overall feedlot performance (measured by dry matter intake, average daily gain, finished weights, and fat development) above what was realized with corn based rations.
Following last week’s rally, DDGS prices for international destinations were softer this week in response to international freight issues. The Hanjin Shipping crisis and subsequent ocean freight rate increases that will begin in October are prompting a hand-to-mouth approach for international buyers this week. However, international demand remains active for several market including Taiwan, Vietnam, and Korea. Modest declines (less than $3/ton) for October shipments to Malaysia, Vietnam and Taiwan were observed while prices to Japan were mildly stronger (up $1/ton).
Trading has been quiet in the U.S. market this week with buyers, having covered immediate needs, taking a “wait and see” approach. Despite any quietness, however, DDGS are finding ways to remain competitive in feed rations. The price per protein unit of DDGS was $4.72 this week versus $6.40 per protein unit in soybean meal. DDGS are still holding 101.4 percent of the value of corn and some pricing strength was observed in the Western Corn Belt, particularly in the Dakotas and part of Iowa. Merchandisers are beginning to report intentions for seasonal plant maintenance shutdowns. These shutdowns typically last a few days which should bring some support to the DDGS market in the coming weeks. Some traders are reporting feelings of a near term pricing low setting in with the maintenance shutdowns ending any further market weakness.
Ethanol Comments: Ethanol margins are mixed this week after production rose 6,000 barrels per day last week to reach 1.004 million barrels per day. Expanding production failed to add to ethanol stocks which decreased 40,000 barrels to 20.207 million. Oddly, gasoline consumption fell along with stocks as 9.406 million barrels per day were delivered this past week, down from 9.595 million the week prior. The concurrent fall of stocks and consumption seems to implicate higher exports as the force behind declining stocks. Ethanol exports were exceptionally strong in July and similar strength may be carrying over into the current month.
The margin between the corn price and the value of ethanol and coproducts was mixed this past week across the four reference markets (see below), with gains noted in Illinois and Nebraska. Compared to this same week last year, the spread is $0.14-$0.38 higher in all reference markets.
- Illinois differential is $2.04 per bushel, in comparison to $2.02 the prior week and $1.66 a year ago.
- Iowa differential is $1.86 per bushel, in comparison to $1.96 the prior week and $1.61 a year ago.
- Nebraska differential is $1.71 per bushel, in comparison to $1.69 the prior week and $1.54 a year ago.
- South Dakota differential is $1.99 per bushel, in comparison to $2.07 the prior week and $1.85 a year ago.