Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Indications are that the market was off this past week, especially the barge market. The river opened early but the reality of plenty of physical barge applications but no business to apply against them weighed on the market. There are anecdotal reports of steeper declines but average prices were down $2/container nearly across the board, with a larger decline for product delivered by rail in Illinois. The contrarian was FOB Gulf prices, which were up $2/container for April and May, and up $1/container for June.
One trader described the markets as being in a state of confusion due to strong ethanol production but slower export sales. This has placed emphasis on nearby shipments, including pushing hard on April shipments.
Ethanol Comments: This past week’s ethanol production was down 4,000 barrels per day to 995,000 bpd, and U.S. weekly ethanol stocks were off 334,000 barrels to 22.52 million barrels. However, assuming ethanol production follows its seasonal pattern, it should begin to pick up pace in the weeks ahead leading to a peak in July. Moreover, the amount of corn being used to produce ethanol is on a pace to meet USDA’s projection.
Meanwhile, U.S. ethanol exports to China soared to 111,426,533 liters in January from 40,099,685 liters (+178 percent) at an average price of $0.38 per liter ($482.69/MT)). This is a high-water mark for January and the second-highest in the last twelve months. These exports had hit a record 123,677,115 liters in October at an average price of $0.46 per liter ($590.19/MT). As there are only four state-owned entities in China that are licensed to produce ethanol, the nation’s high domestic corn prices have made U.S. ethanol quite attractive, particularly when the firms’ operating margins have deteriorated so significantly in the past year. The following tables compare U.S. ethanol exports worldwide with those specifically to China (see tables below).
India should be in the market in 2016/17 to nearly triple its ethanol imports over 2015/16 as less sugarcane bumps up against a mandated 10 percent fuel blending requirement. But, New Delhi imposes excise and value added taxes in a manner that prevents U.S. sales.
The margin between the corn price and the value of ethanol and coproducts was up this past week in all four market basket states:
- Illinois differential is $1.33 per bushel, in comparison to $1.30 the prior week and $2.05 a year ago.
- Iowa differential is $1.27 per bushel, in comparison to $1.22 the prior week and $1.83 a year ago.
- Nebraska differential is $1.48 per bushel, in comparison to $1.38 the prior week and $1.68 a year ago.
- South Dakota differential is $1.48 per bushel, in comparison to $1.44 the prior week and $1.79 a year ago.