Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: The consensus from merchandisers seems to be that DDGS trading has slowed and prices have plateaued after climbing higher for the last few weeks. After a few weeks of aggressive buying, Asian clients are now seeing if they can encourage prices to come back down. That could happen to some degree because this is normally a period when demand seasonally slows. However, the extent of any demand slowdown is hard to determine because domestic buyers appear to increase their inclusion rate of DDGS within rations when prices decline.
Both foreign and domestic buyers are expressing interest in getting their usage needs met for the remainder of this summer. A number of foreign buyers are looking to source DDGS supplies through the container market for the June-August time period to offset lagging shipments of soybeans and meal out of South America. It was noted that some of the Southeast Asian buyers were fishing behind the net for prices from three weeks ago. As discussed in the Outlook section of this report, such prices may be difficult to obtain for several more weeks.
Ethanol Comments: There was some market discussion this past week that the price of ethanol has weakened against gasoline because of concerns about the prospects of Brazilian imports, but such concerns seem a little premature at this time. Ethanol imports are likely to increase after June 1, but it would take a large increase in ethanol imports to replenish U.S. ethanol stocks to last year’s levels. Current U.S. ethanol stocks are more than 20 percent below last year’s levels.
Last week’s production increase to 885,000 barrels per day (bpd) was an expansion from the prior week’s level of 863,000 bpd, but below the level from the same week last year of 904,000 bpd. The weekly production increase contributed to an increase in stocks of 16.4 million barrels from the prior week’s level of 16 million barrels. However, there is still a ways to go before returning to last year’s stocks level of 21.2 million barrels. Higher ethanol prices likely would generate increased ethanol imports, but that trigger point does not seem to have been reached yet, as last week’s ethanol imports fell back to zero. Furthermore, the price differential between the price of corn and co-product processing values this past week did not give a uniform indication that ethanol margins are moving higher:
– Illinois differential increased to $2.52 per bushel, which is up from $2.48 the prior week and above $1.32 last year.
– Iowa differential decreased to $2.05 per bushel, which is up from $2.15 the prior week and above $1.19 last year.
– Nebraska differential decreased to $2.32 per bushel, which is up from $2.37 the prior week and above $.96 last year.
– South Dakota differential increased to $2.28 per bushel, which is up from $2.21 the prior week and above $1.45 last year.