Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: This past week there were consistent declines of $5 to $10/MT for both domestic and international prices of DDGS. However, there is an ebb and flow in the price changes from week to week. For example, last week bulk rates from the Gulf of Mexico were attractive because barge and FOB vessel rates had the largest average price declines. This week those same rates rebounded slightly while the rail rates to the Pacific Northwest region and California had further rate declines that ranged from $10 to $15/MT. Texas and Mexican DDGS buyers will likely be attracted by the comparable price declines this week.
In a similar example, there was a large rate decline for containerized DDGS to the Philippines last week. This week there was an additional rate decline to the Philippines, but a similar sized decline occurred for all other Asian destinations.
Asian buyers who were waiting for a price setback several weeks ago may now have an opportunity to purchase near their prior objective levels. In China, domestic soymeal prices have recently become more competitive but this development does not override the pricing opportunities of DDGs for spring and summer. Some Chinese buyers seem to already perceive the opportunity because sales occurred this week for 3,000/MT per month for April and May at $305/MT, CFR, Shanghai/Qingdao.
Ethanol Comments: Ethanol continues to be the least expensive means for refiners to increase octane, reports a story by Reuters. That same news source notes that ethanol producers have improved their operations for efficiency and are financially stronger than in the past due to consolidated and reduced debt. Basically, the whole industry can better handle cycles in the market. As well, stability is reflected in the fact that this week’s ethanol stocks of 20.6 million barrels remained nearly the same as the week-ago level of 20.4 million barrels. The daily production rate of 978,000 barrels per day (bpd) was also basically unchanged from the prior week’s level of 979,000 bpd.
Stability is also implied by the differential between the cost of corn and the return for the co-products of ethanol and DDGS. While the differential is not margin and is only reflective of the current spot market, it implies stability with its consistent improvements across the Corn Belt for the week ending Friday, January 30, 2015:
- Illinois differential is $1.81 per bushel, in comparison to $1.63 the prior week and $3.49 a year ago.
- Iowa differential is $1.56 per bushel, in comparison to $1.32 the prior week and $2.60 a year ago.
- Nebraska differential is $1.43 per bushel, in comparison to $1.26 the prior week and $2.48 a year ago.
- South Dakota differential is $1.68 per bushel, in comparison to $1.60 the prior week and $2.72 a year ago.