Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: The nearby rate for bulk DDGS at the Gulf of Mexico was unchanged, but the price in more distant months moved higher. Domestic buyers found that DDGS prices were higher by $4/MT or more in all months into the future. Rail delivered rates to California were up the most, by more than $10/MT. This domestic price action stood in contrast to the unchanged offers being presented to Asian buyers of containerized DDGS. One reason for this better offer to Asian buyers is because domestic purchasers are active primarily in the nearby spot market. DDGS merchandisers simply need to charge a higher rate when inventory flow is less certain.
Asian buyers seem to recognize that merchandisers are ready to work with them. As a result, one merchandiser reported that he was able to sell 13,400 MT to Vietnam, Taiwan, China and Korea for shipment from June through August.
Ethanol Comments: A favorable development this past week was a substantial decline of 17 percent in total U.S. ethanol stocks compared to the year-ago level. This is important because ethanol prices tend to be weighed down whenever stocks are larger than the year-ago level by more than 20 percent. Further good news is found in the fact that weekly stocks declined by 2.2 percent, to 20.3 million barrels. This decline in ethanol stocks occurred while daily average production increased to a rate of 912,000 barrels per day (bpd). This does not seem to be an aggressive production rate as it is the same as the four-week average and below the year-ago production level of 922,000 bpd.
In the immediate near-term, there is unlikely to be any substantial increase in ethanol production because the differentials between the spot price of corn and the co-products gives little indication of improved financial conditions for ethanol producers in primary regions of the U.S. Corn Belt. Those differentials are as follows for week ending May 15, 2015:
- Illinois differential is $2.49 per bushel in comparison to $2.59 the prior week and $3.45 a year ago.
- Iowa differential is $2.39 per bushel in comparison to $2.30 the prior week and $3.27 a year ago.
- Nebraska differential is $2.18 per bushel in comparison to $2.18 the prior week and $3.10 a year ago.
- South Dakota differential is $2.61 per bushel in comparison to $2.53 the prior week and $3.74 a year ago.