Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Trading volume has been light this week as sellers are defending prices while buyers are waiting to see if any price reductions will come. Consequently, prices have been largely flat to slightly lower this week but strength was noted in prices for containers destined for Southeast Asia. Prices in Minnesota, Iowa, and Kansas were higher this week on increased feed demand from the cold weather while Nebraska and South Dakota prices were unchanged. DDGS remain very competitive against soybean meal in feed rations on a per protein unit cost basis, priced $2.53 below soymeal. FOB Gulf prices were slightly lower this week as exporters work to keep DDGS competitive with corn in the export program. DDGS are priced at 102 percent of FOB Gulf corn and are finding ways to remain competitive as exporters seek to ship corn before the Brazilian export program begins.
Recent research is suggesting that DDGS may have future demand from human nutrition. A South Dakota State University graduate student recently presented research where DDG flour was used in a whole-wheat flatbread that is popular in Asian countries. The work has also expanded to include naan bread which is popular in India, Pakistan, and Afghanistan. The goal of this research is to use the 40 percent dietary fiber and 36 percent protein in DDGS to produce flour-based products (i.e., breads) that are more nutritionally rich. If research in this area proved fruitful, it could be positive for the U.S. corn industry. Human consumption of DDGS could transform a by-product into a primary product and make the “food versus fuel” argument even more complex.
Ethanol Comments: Ethanol plants have been running overtime and exceeding production expectations nearly every week this marketing year. Last week, ethanol producers processed 109 million bushels of corn when only 100.5 million were needed to meet USDA’s annual forecast. A strong export market and excellent production margins are driving the production boom. The odds are ever increasing that the USDA will increase their expectations for ethanol use in the 2016/17 crop year which will likely motivate a mild reduction in U.S. ending stocks.
Ethanol margins were slightly higher again this week and increased in three of the four reference markets. Nebraska ethanol producers saw the only decrease in margins, losing $0.01/bushel this week, though their margins are $0.68/bushel higher than last year. Margins in other states were higher, with Iowa and South Dakota seeing increases near $0.20/bushel this week.
- Illinois differential is $2.30 per bushel, in comparison to $2.23 the prior week and $1.53 a year ago.
- Iowa differential is $2.27 per bushel, in comparison to $2.07 the prior week and $1.34 a year ago.
- Nebraska differential is $2.24 per bushel, in comparison to $2.25 the prior week and $1.56 a year ago.
- South Dakota differential is $2.60 per bushel, in comparison to $2.41 the prior week and $1.48 a year ago.