Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices are in decline, and merchandisers are receiving requests for even lower prices from their customers. The DDGS merchandisers would not mind such circumstances if buyers also increased their bids when prices go up. Of course, that is not the way things work. DDGS merchandisers are striving to maintain long-term business relationships and will work with their favored customers who stick with contracts – and the merchandisers will help those clients receive the best prices they can offer on their future purchases.
This week, merchandisers offered both foreign and domestic buyers price reductions of an additional $15/MT. Discussions about hesitant demand encouraged this week’s sharp decline in DDGS prices. The decline in corn futures contracts at the end of this week may enable merchandisers to offer even lower DDGS prices at the beginning of next week. However, it should be noted that USDA’s Acreage report will be released on June 30, and there is a common expectation that data within that report will indicate a reduction in U.S. corn acreage. As a result, the price of corn futures may strengthen as the date of that report approaches.
Ethanol Comments: The average daily rate of ethanol production increased to 992,000 barrels per day (bpd) for the week ending June 5. The prior-week’s rate of production was 972,000 bpd. These recent increases in production have been occurred because sufficient demand has enabled U.S. ethanol stocks to remain stable. The most recent stocks level of 20.2 million barrels is virtually unchanged from the prior week’s level of 20.1 million barrels and less than 10 percent above the year-ago level of 18.4 million barrels.
Modest but consistent declines in ethanol producer margins may cause the production rate to plateau, or even decline in the coming weeks. The differentials between the spot price of corn and ethanol co-products imply that near-term margins for ethanol facilities may see a slight decline. The differentials for the week ending June 12, 2015 are as follows:
- Illinois differential is $2.03 per bushel, in comparison to $2.19 the prior week and $3.53 a year ago.
- Iowa differential is $1.91 per bushel, in comparison to $1.98 the prior week and $3.33 a year ago.
- Nebraska differential is $1.64 per bushel, in comparison to $1.69 the prior week and $3.23 a year ago.
- South Dakota differential is $2.25 per bushel, in comparison to $2.31 the prior week and $3.76 a year ago.