Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS merchandisers noted that demand has slowed and prices trended downward this past week. Customers were making inquiries about potential purchases for September through December, but the bids generally remain well below the offers because many customers desire to see how prices will develop in U.S. feed grain markets this summer. The result is that merchandisers offered additional price concessions in order to entice more near-term buying and movement of inventory.
The price of bulk DDGS delivered to the Gulf of Mexico in June declined by more than $15/MT and by more than $10/MT for delivery in July or August. Offers to domestic buyers also declined by as much as $15/MT for sizable bulk purchases of rail-delivered DDGS during the June-August time period. Containerized DDGS prices had already been in decline during the past few weeks, but they also dropped by an additional $5/MT for June-August.
DDGS buyers from China and Korea were making inquiries this past week about the best possible price, but none seemed active. However, there are market rumors that a Vietnamese customer has made a sizable purchase of DDGS. That could end up looking like a very wise decision a couple of weeks from now because there is a seasonal tendency for Chicago corn futures contracts to bounce higher prior to the period of corn pollination.
Ethanol Comments: The weekly ethanol production data from the Energy Information Administration (EIA) held a couple of significant points this week: The first point is that the total ethanol stocks remained stationary at 20.1 million barrels while there was a slight increase in the average daily production rate from the week-ago rate of 969,000 barrels per day (bpd) to the current rate of 972,000 bpd. The second more significant factor is that the current total stocks level of 20.1 million barrels is now only 10 percent above the year ago inventory of 18.3 million barrels. This reduced percentage in relation to a year ago implies that current ethanol prices, which are already well below year ago, do not need to continue weakening if the price of gasoline stabilizes.
The differentials between the spot price of corn and ethanol co-products in primary regions of the Corn Belt are not producer margins, but the data does imply that sizable differences in year-over-year actual returns does exist for the majority of ethanol facilities. The differentials for week ending June 5, 2015 are as follows:
- Illinois differential is $2.19 per bushel in comparison to $2.39 the prior week and $3.64 a year ago.
- Iowa differential is $1.98 per bushel in comparison to $2.14 the prior week and $3.49 a year ago.
- Nebraska differential is $1.69 per bushel in comparison to $1.84 the prior week and $3.38 a year ago.
- South Dakota differential is $2.31 per bushel in comparison to $2.42 the prior week and $3.91 a year ago.