Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Rising soybean meal prices are helping keep DDGS competitive in domestic feed rations. On a per-protein unit basis, DDGS have a $2.66 advantage over soybean meal as South American weather concerns buoy the soy complex. The holidays created a brief lull in demand and merchandisers lowered prices to stimulate additional demand. CIF NOLA prices and FOB Gulf prices were both slightly lower this week but prices in Alberta were $2-3/ton higher. On the international market, prices were softer due to the holidays. However, end users have likely only covered their needs through the holidays and not much further into 2017. Accordingly, as business returns to normal during the first weeks of January, additional buying and a price rebound are likely. Such an event could quickly erase any softness observed in the markets this week.
Ethanol Comments: Ethanol producers finished 2016 with a bang, pushing production to a record-high 1.043 million barrels/day (306.64 million gallons per week). The 1.5 percent increase came even as ethanol stocks were flat and gasoline supplied (a measure of ethanol consumption) fell 11 percent on holiday-reduced demand. Ethanol prices worked their way lower in recent weeks but stable cash corn prices allowed plants to maintain solid margins. The outlook calls for a slow decrease in production heading into the end of January but production should remain above 303.4 million gallons per week.
Ethanol margins were lower this week three of the four reference markets. Producers in Illinois saw margins experience the only increase as they gained $0.02/bushel this week. Margins in South Dakota and Iowa experiences the largest declines, falling $0.29/bushel and $0.19/bushel, respectively. Ethanol producers are still enjoying comparatively good margins, which are up $0.70/bushel over last year on average to start 2017. Specific margins for the four reference markets are as follow:
- Illinois differential is $2.08 per bushel, in comparison to $2.06 the prior week and $1.47 a year ago.
- Iowa differential is $2.02 per bushel, in comparison to $2.21 the prior week and $1.29 a year ago.
- Nebraska differential is $2.13 per bushel, in comparison to $2.20 the prior week and $1.44 a year ago.
- South Dakota differential is $2.22 per bushel, in comparison to $2.51 the prior week and $1.44 a year ago.