Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: There are conflicting reports about current market trends but one report says that data published on February 22 by China’s General Administration of Customs indicates that imports of DDGS surged in January, 2016 to 290,653 tons. Reuters quotes a Chinese buyer saying that “Companies are still buying to benefit from low U.S. prices…” The article quotes the average shipment value at $235.40/MT. Traders expect China’s DDGS imports to continue for a few more months. These imports follow a record volume of DDGS and sorghum imports by China in 2015. Meanwhile, Shanghai JC Intelligence Co. Ltd. asserts that China’s January sorghum imports also remained solid at 923,941 MT, versus 733,590 MT a year ago.
Overall, the trade indicates a firming of prices (average +$4/container) this past week for April/May delivery to destinations such as China and Japan, but an average decline of $1.50/container with Thailand as the destination.
Ethanol Comments: The U.S. Energy Information Administration (EIA) expects petroleum prices to move back towards equilibrium and average $40/barrel for Brent crude in 2016, though the market doesn’t look that way at the moment. Nonetheless, the U.S. ethanol industry plans to double its exports over the next six years based on world demand for octane to reduce pollution. Green Pool Commodity Specialists forecast global ethanol demand to expand by 0.9 percent in 2016 to 118.7 billion liters, against 117.9 billion liters in production. They conclude that Asia will be buying more ethanol from the U.S. – which may be driven in part by a decision in some markets against allowing energy demand to compete with their own domestically produced supply of food.
U.S. ethanol production this past week rose to 994,000 barrels per day, up from 975,000, but in an indication that perhaps the seasonal peak in supply building has occurred, surplus stocks fell for the first time in several weeks – though by just 100,000 barrels to a total of 23 million.
Meanwhile, the margin between the corn price and the value of ethanol and coproducts continued to push higher last week in Iowa and South Dakota, and remains higher than a year ago in Nebraska (see below).
- Illinois differential is $1.36 per bushel, in comparison to $1.36 the prior week and $1.73 a year ago.
- Iowa differential is $1.28 per bushel, in comparison to $1.26 the prior week and $1.43 a year ago.
- Nebraska differential is $1.47 per bushel, in comparison to $1.48 the prior week and $1.37 a year ago.
- South Dakota differential is $1.52 per bushel, in comparison to $1.50 the prior week and $1.58 a year ago.