Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Transitions in the DDGS market have generated substantial declines in price this past week and opportunities materialized to purchase domestic DDGS at prices $25 below those of the prior week and $40 lower in the containerized export market. These alterations to DDGS market conditions are not estimated to be permanent, but domestic end-users may consider adjustments to feed ratios for more DDGS.
Domestic buyers are striving to be patient and wait for some evidence that a bottom has formed in DDGS prices before stepping up to purchase. Those buyers seem to be keeping one eye on each other and recognize that present DDGS price levels offer a profitable pricing opportunity for animal production. The anticipated increase in domestic DDGS demand is foreseen to also benefit the domestic barge market and other bulk shippers.
Exported DDGS that were in transition to China seem to be finding ready access in other locations such as Korea and Indonesia. As present DDGS production is absorbed by alternative foreign locations and domestic consumption, it will be interesting to see if competition will eventually be necessary to purchase the increased DDGS flow back out of these channels. That future condition is currently unknown, but the one certainty is that DDGS can now be purchased at or below break-even levels.
Ethanol Comments: USDA left 2014/15 corn used for ethanol and DDGS production unchanged in the June WASDE at 5.050 billion bushels. This is exactly the same amount that is anticipated to be used in the current 2013/14 season. It seems apparent that USDA is not anticipating any major alterations for the U.S. ethanol sector and presumably recognizes that an ebb-and-flow of stock occurs. Total U.S. ethanol stocks have recently been increasing and the latest estimate is 18.4 million barrels for the week ending June 6. This is a slight increase above the prior-week’s production level of 18.3 million barrels. Average daily production for the week was 944,000 barrels per day (bpd) in comparison to the prior-week’s level of 938,000 bpd. Considering the recent decline in corn prices, this production increase is no aggressive escalation. Nor are the returns of ethanol facilities in a precipitous decline. This is implied by the differential between the cost of corn and the value of ethanol and DDGS at processing plants at facilities across the U.S. Corn-Belt.
The differentials between corn and co-product processing values for this week ending June 13, 2014 are as follows:
- Illinois differential is $3.53 per bushel in comparison to $3.64 the prior week and $2.21 a year ago.
- Iowa differential is $3.33 per bushel in comparison to $3.49 the prior week and $2.05 a year ago.
- Nebraska differential is $3.23 per bushel in comparison to $3.38 the prior week and $2.26 a year ago.
- South Dakota differential is $3.76 per bushel in comparison to $3.91 the prior week and $2.07 a year ago.