Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Substantial export demand for bulk volumes of DDGS through the Gulf of Mexico seems to be building because barge bids are pushing prices higher in the spot market. Barges are reported to be priced steady at approximately $265/MT through February. This action has temporarily elevated the local domestic prices of DDGS in relation to other feed ingredients. One of the leading merchandisers noted that this foreign buying could momentarily cannibalize some of the domestic demand, but other feed prices are also being affected by foreign demand. As discussed in the preceding Outlook section, the export demand has pulled sorghum prices above the price of corn.
Merchandisers report that while the nearby DDGS prices are well supported and more thinly offered, the deferred time periods have more volume available and prices have declined in unison with the recent action of corn futures contracts. However, that could soon change because the approval of MIR-162 by the Chinese Ministry of Agriculture (MOA) has resulted in many inquiries from Chinese buyers of DDGS for the March/April/May time period.
Ethanol Comments: Crude oil contracts appear to have recently leveled off and that may give some stability to ethanol contracts that have recently traded down to record low levels. Please recall that the point was noted within this section last week that the decline in petroleum contracts had temporarily caused the price of ethanol to be above gasoline, and those developments could in-turn slow ethanol blending and result in the building of ethanol stocks. This seems to have happened.
A pronounced increase in ethanol stocks was reported in this week’s data. Ethanol stocks increased by 7.3 percent in one week to 20.2 million barrels. This amount is 25.8 percent above the year ago level of 16.3 million barrels. The price of ethanol can be negatively influenced when ethanol stocks increase beyond 20 percent of the year ago level, but any further sizable decline may be negated by the fact that ethanol prices are already low and petroleum contracts appear to have plateaued.
The differential between the cost of corn and the return for the co-products of ethanol and DDGS did decline in different sections of the Corn Belt for the week ending Friday, January 16, 2015, but it was not in free-fall:
- Illinois differential is $1.57 per bushel in comparison to $1.67 the prior week and $4.31 a year ago.
- Iowa differential is $1.29 per bushel in comparison to $1.53 the prior week and $2.79 a year ago.
- Nebraska differential is $1.22 per bushel in comparison to $1.53 the prior week and $2.98 a year ago.
- South Dakota differential is $1.60 per bushel in comparison to $1.79 the prior week and $3.21 a year ago.