Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS buyers were encouraged back on March 13 to request that DDGS merchandisers inform them when specific pricing objectives became available. A potentially favorable pricing opportunity occurred this week when corn contracts sold off sharply immediately after the publication of USDA’s Prospective Plantings and Stocks reports. However, there seemingly was a substantial pool of buyers who were waiting on such a sell-off to occur because they quickly reacted and started making purchases. The result is that corn contracts quickly regained more than half of Tuesday’s losses.
Ethanol plants and other domestic users of U.S. corn will actively monitor developing weather conditions across the Corn Belt this spring. Last year the U.S. weather condition remained favorable throughout the growing season, but that is not typical. Domestic buyers know that the price of corn can spike suddenly if spring weather becomes excessively wet and delays the planting of U.S. corn. Such concerns may explain why domestic DDGS buyers paid up to $5/MT more this past week even though the price of containerized DDGS for foreign buyers was unchanged to slightly lower. Foreign buyers may wish to request that DDGS merchandisers keep them informed on a daily basis about changing U.S. weather and soil moisture conditions as corn planting gets underway.
Ethanol Comments: Total U.S. ethanol stocks declined by a sizable 3.6 percent, from 21.3 million barrels to 20.5 million barrels, for the week ending March 27. Increased consumption seems primarily responsible for this decline in stocks as the average daily rate of production of 952,000 barrels per day (bpd) was basically unchanged from the prior-week’s level of 953,000 bpd.
U.S. gasoline, and accompanying ethanol, consumption is anticipated to be strong this spring as the national average retail price of regular gasoline is presently about $2.45 per gallon, which is more than $1.10 per gallon under the year-ago price. As the old adage in goes, “the best fix for low prices is low prices.” This summer it will be less expensive to fill up the tank and take the family on a weekend vacation and the season often kicks off over the weekend of Easter.
Due to the Good Friday holiday this week, there will be no report of ethanol and co-product processing values from the primary regions of the U.S. Corn Belt.