Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices FOB Gulf are now $14.50/MT higher than they were four weeks ago as the DDGS rally continues. The rally took a pause this week to reassess market conditions, leaving prices with a slightly weaker tone and FOB Gulf prices down $1.50/MT at $151/MT. FOB Gulf prices have come under some pressure to compete with falling FOB corn offers and a $12/MT drop in FOB soybean meal prices. Rail-delivered DDGS at the PNW fared better, losing only $2/MT as export and international prices were largely steady. Prices for 40-foot containers to Korea, Taiwan, and the Philippines were steady to $1/MT higher this week while prices for DDGS exported to Vietnam and Japan fell.
The value of DDGS FOB ethanol plants is 72 percent of corn futures this week and 28 percent of soybean meal futures. On a per protein unit basis, DDGS are $3.24 cheaper than soybean meal which will aide in feed ration inclusion. On the export front, FOB Gulf DDGS prices are retaining 89 percent of FOB corn value and 39 percent of FOB soybean meal value. Last week’s logistical issues (slow barge movement due to fog) have largely been resolved and exporters are catching up on contracted deliveries. Looking forward, ethanol production in unlikely to continue its record-breaking pace and will eventually slow, bringing DDGS supplies lower. This should underpin the DDGS market and provide a platform for prices to move higher.
Ethanol Comments: New record highs in ethanol production were achieved once again this week. The EIA’s weekly report showed ethanol producers rolled out an average of 1.061 million barrels per day (311.9 million gallons per week), an increase of 10,000 barrels/day (1 percent) from the prior week. At the same time, ethanol stocks were up 0.7 percent to their highest level since last February and gasoline supplied increased by 4 percent. Ethanol prices have been steadily falling for two months, commensurately pressuring ethanol production margins. Some estimates have ethanol returns over fixed costs at -$0.40-60/bushel right now. Surely these low margins will eventually stifle production, but when these forces will take effect remains unclear.
Across the four reference markets, ethanol margins fell in three; Illinois, Iowa, and Nebraska. Iowa producer margins took the largest hit, falling $0.27/bushel. South Dakota margins increased, helped by a $3/ton increase in DDGS prices. This week’s average margin of $1.30/bushel is now $0.09/bushel lower than one year prior.
- Illinois differential is $1.18 per bushel, in comparison to $1.27 the prior week and $1.35 a year ago.
- Iowa differential is $0.99 per bushel, in comparison to $1.26 the prior week and $1.21 a year ago.
- Nebraska differential is $1.27 per bushel, in comparison to $1.44 the prior week and $1.41 a year ago.
- South Dakota differential is $1.74 per bushel, in comparison to $1.71 the prior week and $1.55 a year ago.