Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS remains priced at around 115-120 percent of the value of corn to most destinations, which makes it a relative bargain considering this is below its feed component value as estimated by USDA. Some in the trade say that buyers expect the market to go lower and are possibly waiting, but they argue that the fall in prices that has already occurred takes account of all of the bearish factors. There is no reason for sellers to lower their prices any further for the export market when the U.S. domestic market is firm and appreciative of its value. Perhaps in recognition of the above, average offers to Asia are up from those indicated before the holidays.
Meanwhile, prices for New Orleans and the Gulf were down slightly, while rail-delivered domestic rates were slightly down or up depending on the specific route. Prices for KC & Elwood, IL rail yard (delivered ramp) are unchanged through February.
Ethanol Comments: U.S. ethanol production was at 996,000 barrels per day, a slight increase from the 992,000 barrel per day average a week earlier. Weekly stocks were up an equivalent 5,000 barrels. There have been no ethanol imports since before the holidays. By contrast, the news has focused on the record amount of U.S. fuel ethanol exports to China in 2015, with sales in October alone exceeding the total of exports for the previous ten years combined.
While U.S. EPA set fuel ethanol blending requirements below statutory levels, they are nonetheless at a level that will push on the blend wall, spurring further efforts to overcome infrastructure hurdles. Most important is what is happening on the demand side where low fuel prices have spurred record U.S. auto sales (E15 ready) of larger vehicles combined with an overall increase in miles driven.
India is taking a similar approach. After meeting an earlier target of five percent for ethanol blending, on 22 December the government announced that it is doubling the mandate to a 10 percent blend.
Meanwhile, for the week ending January 7, 2016 the differential between the price of corn and co-products for the four regions of the Corn Belt is as follows:
- Illinois differential is $1.47 per bushel, in comparison to $1.29 the prior week and a holiday a year ago.
- Iowa differential is $1.29 per bushel, in comparison to $1.12 the prior week and holiday a year ago.
- Nebraska differential is $1.44 per bushel, in comparison to $1.33 the prior week and holiday a year ago.
- South Dakota differential is $1.44 per bushel, in comparison to $1.45 the prior week and holiday a year ago.