Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: As expected, there have been no immediate negative effects from China MOFCOM’s announced anti-dumping/countervailing duty investigation into U.S. DDGS sales. Sales to China had already slowed at the same time demand from other Asian countries (Vietnam, Korea, Thailand, Taiwan) continues. In fact, prices this past week incurred some of the smallest changes in several weeks, basically unchanged for February delivery and down just 1 percent for March delivery. 40-foot containers FOB the Gulf for February were at $181, versus $178 a week ago, and February shipments to Taiwan or the Philippines were up a dollar each to $209 and $224, respectively. Containers shipped to Malaysia next month were up $6 from a week ago to $228.
Meanwhile, the DDGS supply is actually likely to grow tighter and more precious. This is because ethanol producers usually slow down their production between now and spring due to these being lower gasoline consumption months.
Ethanol Comments: The U.S. grind for ethanol continues to be the one bullish factor in the market. Last week’s ethanol production average of 1,003 thousand barrels per day was once more above the average needed to meet USDA’s corn-for-ethanol forecast. The caution is that the production is adding to stocks, which are above last year’s level at this time. The correction that is likely to occur is a slowdown in ethanol production. Historically, ethanol producers have reduced their output during this time of year because gasoline demand – and thus blending requirements – tends to drop off in the winter until warmer weather arrives in spring.
Overall, the U.S. Energy Information Agency (EIA) released its updated forecast calling for production in both 2016 and 2017 to average 970 thousand barrels a day, which is 6 thousand barrels per day greater than in 2015.
Meanwhile, ethanol production margin remains slim and the blender margin negative (note: due to a technical error ethanol margin data for Illinois was unavailable at the time of this report’s publication).
- Iowa differential is $1.12 per bushel, in comparison to $1.29 the prior week and $1.52 a year ago.
- Nebraska differential is $1.36 per bushel, in comparison to $1.44 the prior week and $1.53 a year ago.
- South Dakota differential is $1.33 per bushel, in comparison to $1.44 the prior week and $1.79 a year ago.