Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Containerized DDGS prices continued to decline this past week, with the largest declines in the domestic market. Rail-delivered rates to California and the Pacific Northwest declined by more than $15/MT. Prices offered to Laredo, Texas declined by a substantial $18/MT.
Several thousand tons traded at $232-234 for Chicago truck delivered. Further north in the region of St. Paul, the barge market is consuming the largest volume of DDGS. In other locations the container market was reported to be quiet. However, both domestic and foreign buyers are showing increased interest in the October-November-December time period, but little has been sold as buyers wait for further price declines. Buyers have presumably noted that corn futures closed out this week looking technically indecisive. While there seems to be a general consensus that prices could drift lower in the near-term, and are likely to decline more this fall, some level of price rebound is likely to occur prior to summer pollination.
DDGS sales to Asia seem poised to pick up due to growing demand. There were reports that 2,500 MT of DDGS traded for July and 1,500 MT for August to Zhanjiang at $342/MT. As well, there was a sale of 17,000 MT for June and July to the following locations:
HCMC: $340 JUN & JUL
Haiphong: $340 JUN
Huangpu: $337 JUN & JUL
Shanghai $330 JUN & JUL
Busan: $328 JUL
Ethanol Comments: The current setback in corn futures prices has the potential to improve ethanol producer margins. Such an improvement is implied in the current differential between the price of ethanol and co-products that is reported in key locations across the U.S. Corn Belt:
- Illinois differential is $3.45 per bushel, in comparison to $3.19 the prior week and $2.34 a year ago.
- Iowa differential is $3.27 per bushel, in comparison to $3.01 the prior week and $2.34 a year ago.
- Nebraska differential is $3.10 per bushel, in comparison to $2.83 the prior week and $2.37 a year ago.
- South Dakota differential is $3.74 per bushel, in comparison to $3.47 the prior week and $2.35 a year ago.
Such attractive margins are likely to encourage abundant corn-based ethanol production. The result is that U.S. ethanol stocks are expected to remain above year-ago levels into the the forseeable future. The U.S. Energy Information Administration (EIA) reported that ethanol stocks increased to 17.3 million barrels for the week ending May 9. That is a slight increase above the week prior level of 17.1 million barrels and 5.3 percent above the year-ago level of 16.4 million barrels. Ethanol production during that same week increased to an average rate of 922,000 barrels per day (bpd) from the prior week’s average rate of 894,000 bpd. The average daily rate of ethanol imports also increased that week to 43,000 bpd.
U.S. ethanol imports have been sporadic this season as alternations occur in the price of sugar and exchange rates. The prospect of El Niño developing could cause an eventual escalation in the price of Brazilian sugar. Such a weather development would be benefical to U.S. corn-based ethanol producers. Obviously, exporting surplus ethanol stocks is the ideal long-term scenario for U.S. ethanol producers because maintaining stocks above year-ago levels for any prolonged period of time tends to cap prices and can eventually compress producer margins.