Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Trading has been quiet this week though the bid/ask spread is reportedly narrowing for domestic product. Domestic prices are largely steady while international prices are $5-7/MT higher, with baseline demand pulling product through the supply chain. Merchandisers are reporting inquiries from South Korea and Malaysia but few trades have been executed. Reported interest from other Asian countries is light.
Falling cash soybean meal prices have put pressure on the protein competitiveness of DDGS in recent weeks. The per-protein unit cost of DDGS FOB ethanol plants rose slightly to $4.07 this week as did soybean meal, which reached $6.12, giving DDGS a $2.05 per protein unit advantage over soybean meal. Pricing strength was noted in rail-delivered product, where prices for DDGS delivered to the PNW, California, and Laredo, TX were up $2-3/MT this week.
On the export market, DDGS retained a $1.32 per protein unit advantage over soybean meal, based on FOB NOLA prices. FOB NOLA DDGS were quoted at $147/MT, essentially steady with last week. Prices for 40-foot containers bound for Southeast Asia were mixed, some steady and others gaining $3/MT this week. Prices for South Korea, the Philippines, and Thailand showed the greatest strength.
February DDGS exports were up 36 percent from last year, according to data from the U.S. Census Bureau. Over 1.07 MMT of DDGS were exported in February, which represents a 14 percent month-over-month increase and the highest monthly total in six months. Mexico solidified its role as the top destination for U.S. DDGS again and imported 241,000 MT, or 23 percent of total U.S. exports. Turkey, in line with its expanded feed manufacturing role, purchased 152,000 MT.
Ethanol production was sharply lower this week which should work to limit DDGS supplies, giving near-term price support. In the long run, however, it remains to be seen whether ethanol plants will increase production to “normal” levels due to improving margins, or whether they will operate at lower levels with steady DDGS prices and a weaker fuel outlook. The February export data should be encouraging as a signal of improving international demand. The most realistic view for the near-term is for steady to slightly higher DDGS prices.