Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices recently declined to 70 percent of the value of corn in some areas and end-users are suddenly buying very aggressively to take advantage of this opportunity. However, price quotes have not been significantly influenced. For example, rail rates to the Pacific Northwest and California are on average up about $5.00/MT and the FOB vessel rate at the Gulf was up only about $3.00/MT. However, the fact that CIF barge rates were up approximately $15 seems to indicate that bulk DDGS prices will be on the increase if there is no further decline in corn prices.
Domestic hog and poultry buyers have become particularly interested in securing more product from DDGS merchandisers because of the high price of soymeal. In comparison, DDGS appears to be the most cost effective protein source. It was reported that $135 traded in volume for truck delivery to Chicago in October.
U.S. pork and poultry buyers may soon find increasing competition from Mexican cattle and pork buyers in the northwestern states of Sinaloa and Sonora. This is a region of potential strong demand for bulk DDGS if cost effective logistics can be arranged. In the past, Mexican buyers have not been extremely well organized in purchasing DDGS in bulk or containerized form, but the recent setback in DDGS prices seems to have sparked increased interest.
Ethanol Comments: Declining gasoline consumption, the need to move DDGS inventory and increasing competition from Brazilian ethanol exports may combine and start applying pressure to ethanol producer margins. Justification for such a concern was not reflect in this week’s differential between the price of corn and co-products, but stocks did have a significant rebound while production is at sizable levels in comparison to a year ago.
The last reported ethanol production was at an average daily rate of 937,000 barrels per day (bpd) for week ending August 15. This is an increase over the prior week’s production level of 931,000 bpd and the year ago level of 844,000 bpd. Ethanol stocks increased to 18.3 million barrels, in comparison to the prior week’s level of 17.8 million barrels.
The differential between the cost of corn and the co-products at ethanol facilities across the Corn-Belt is the following for week-ending Friday, August 22, 2014:
- Illinois differential is $3.55 per bushel in comparison to $3.55 the prior week and $2.40 a year ago.
- Iowa differential is $3.29 per bushel in comparison to $3.47 the prior week and $2.28 a year ago.
- Nebraska differential is $3.31 per bushel in comparison to $3.50 the prior week and $1.98 a year ago.
- South Dakota differential is $3.90 per bushel in comparison to $3.81 the prior week and $2.57 a year ago.