Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Domestic rail-delivered DDGS prices saw another week of substantial declines of $9 per metric ton. Rate declines were particularly favorable for unit trades. There was a report of a unit trade trading to California in the high $240 per U.S. short ton range for June delivery. Additionally, 5,000 U.S. short tons also sold in the Chicago market at $233 for June delivery.
The average price for containerized DDGS to foreign markets was more stable this past week. The price stability in the average primarily occurred as declines in container rates to Indonesia, China, and the Philippines were offset by increases to South Korea, Japan, Taiwan and Vietnam.
A noteworthy fact is that all DDGS buyers, domestic and foreign, are able to obtain prices for the July and August time period that are below the current spot market. The opportunity to purchase at lower prices in this summer period is attractive because it is prior to harvest in most of the U.S. corn belt.
Domestic and foreign buyers appear to be waiting for a bottom to be defined in prices while there are more aggressive offers from DDGS merchandisers who are trying to stir up demand. The most talented buyers seem to be those who are able to buy while prices are in decline but the more common tendency is for most end-users to step back when prices decline and become more aggressive once prices start to rebound.
Ethanol Comments: The ethanol production level of 927,000 barrels per day (bpd) for the week ending May 23was virtually unchanged from the prior week’s production level of 925,000 bpd. The increase in ethanol stocks to 17.5 million barrels from the prior week’s level of 17 million barrels is attributable to changes in demand since ethanol imports have fallen back to zero.
Changes in consumer purchases are commonly influenced by factors such as holidays and weather, which in turn are influenced by the flow of fuel from refineries to service stations that can cause an alteration of ethanol stocks. The fact that ROB gasoline holds a premium to ethanol is incentive for domestic blenders to mix at the maximum allowable levels.
Other nations whose societies could benefit from improved octane levels could also find the use of U.S. corn-based ethanol to be advantageous, and the recent sell-off in corn prices has improved the availability of this product. Improved ethanol producer margins are implied by the following differentials between the price of corn and processed co-products:
- Illinois differential is $4.12 per bushel, in comparison to $3.83 the prior week and $2.52 a year ago.
- Iowa differential is $4.02 per bushels in comparison to $3.62 the prior week and $2.09 a year ago.
- Nebraska differential is $3.70 per bushel, in comparison to $3.44 the prior week and $2.37 a year ago.
- South Dakota differential is $4.22 per bushel, in comparison to $3.97 the prior week and $2.21 a year ago.