Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: The rally in Chicago corn futures this past week pulled DDGS prices higher too, but DDGS merchandisers did a good job at attempting to constrain prices to a smaller percentage increase. This is possible because a number of ethanol facilities had effectively hedged themselves against a possible price increase in corn. Those facilities were able to keep their prices fixed right up until the release of USDA’s data, and a number of savvy buyers accepted the opportunity. One merchandiser reported that he sold 9,900 MT this past week, and 6,900 MT of the sales occurred at 1:00 AM on June 30 – just a few hours before USDA’s reports were published!
The active sales that occurred early in the week have helped keep down the average DDGS prices that are being reported within this week’s pricing table. Rates for bulk DDGS were particularly attractive early in the week. After USDA’s reports were published, merchandisers were forced by the escalating corn contracts to increase DDGS prices by up to $20/MT. As a result, DDGS buyers have become relatively quiet and are waiting to see how corn pricing conditions develop, and that will be primarily determined by next week’s updated weather forecasts.
It is not uncommon for corn contracts to experience a mid-summer high around the July 4th weekend. However, feed prices are unlikely to sell-off if next week’s weather forecasts predict a continued pattern of heavy rains moving across the U.S. Corn Belt. DDGS buyers are encouraged to contact local DDGS merchandisers early next week in order to obtain updated weather forecasts.
Ethanol Comments: Increases in the price of corn this past week completely offset more subtle increases in the price paid for ethanol and/or DDGS. As a result, there was a further weekly decline in the differential of the spot corn price and the co-products. Consequently, it makes sense that there were also declines in both the weekly production rate of ethanol and total U.S. ethanol stocks.
The average daily ethanol production for the week ending June 26 declined to 968,000 barrels per day (bpd) from the prior-week’s rate of 994,000 bpd. As well, total U.S. ethanol stocks declined in that same period to 19.5 from the prior week’s level of 19.8 million barrels.
The differential between the cost of corn and the co-products are in decline at each of the primary locations of the Corn Belt for week ending July 2, 2015:
- Illinois differential is $1.74 per bushel in comparison to $1.80 the prior week and $3.09 a year ago.
- Iowa differential is $1.52 per bushel in comparison to $1.70 the prior week and $2.93 a year ago.
- Nebraska differential is $1.37 per bushel in comparison to $1.51 the prior week and $2.68 a year ago.
- South Dakota differential is $2.12 per bushel in comparison to $2.28 the prior week and $3.16 a year ago.