Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices have continued their rebound this week as rising soybean meal and FOB corn prices have led the market higher. On Tuesday, the USDA reported the national average DDGS price FOB ethanol plants reached $103/ton, the highest price this year. FOB Plant DDGS prices remain at 77 percent of corn futures and 30 percent of soybean meal futures, slightly higher than last week’s levels but still historically low. On a per protein unit basis, DDGS were priced at $4.14/protein unit this week, a $3.17 discount to soybean meal.
Export and international prices followed the same pattern, with FOB Gulf prices gaining $2/ton this week. The past two week’s large corn export volumes put upward pressure on FOB corn prices and left DDGS exporters limiting increases in their offers to move product. FOB DDGS prices were priced at 90 percent of FOB corn prices this week, equal with the week prior. On the international front, prices were sharply higher this week. Containers destined for Southeast Asia were up $6/ton for February shipment, on average, while shipments to Japan gained $8/ton. Prices for April shipment are averaging $3/ton higher than February shipment, indicating possible higher demand or tightened supplies to come. Given the apparent international demand for corn and soybean meal, it seems DDGS have additional upward price potential going forward.
Researchers at North Dakota State University are testing the feasibility of using wet distillers’ grains and condensed distillers solubles as fertilizer for crops. The research focuses on whether these products are a viable source of phosphorus for corn and spring wheat. Their initial research suggests corn and wheat yields were greater for fields treated with wet distillers’ grains or condensed distillers’ solubles than triple superphosphate.
Ethanol Comments: Weekly ethanol production fell by five million gallons this week (down 1.4 percent) as ethanol stocks continued to build. Over 425,000 barrels were added to ethanol stocks, following the seasonal pattern typical for this time of year. Weekly stocks in 2017 are tracking nearly equal to those of 2016 but margins have already proven more resilient this year than last.
Production margins were higher across all four reference markets this week, gaining between $0.15-0.47 per bushel with Nebraska producer margins gaining the most. The average margin across the U.S. was $1.71 this week, up $0.29/bushel from the week prior and up $0.31 from last year. Looking forward, building ethanol stocks and higher corn prices will pressure margins again. Production will likely fall steadily heading into late spring when seasonal gasoline demand will help work through the building ethanol stocks.
- Illinois differential is $1.58 per bushel, in comparison to $1.28 the prior week and $1.36 a year ago.
- Iowa differential is $1.47 per bushel, in comparison to $1.23 the prior week and $1.26 a year ago.
- Nebraska differential is $1.82 per bushel, in comparison to $1.35 the prior week and $1.48 a year ago.
- South Dakota differential is $1.96 per bushel, in comparison to $1.81 the prior week and $1.50 a year ago.
On the political front, U.S. Senator Joe Donnelly (D-Indiana) voted against the nomination of Scott Pruitt for the EPA’s top spot, citing Pruitt’s record of action against ethanol. Pruitt faces opposition from several democrats regarding his nomination but has broader support from Republicans.