Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Buyers have been observing some differences in price action this past week between the Chicago corn futures contracts and cash DDGS prices. For example, nearby corn futures contracts tested price support and attempted to break through to lower levels. However, the selling of corn futures by speculators has been increasingly met by global end-users who seem to perceive favorable prices that extend out into the future. Growing interest in such activity is one reason that DDGS prices were steady to firmer this past week.
Both domestic and containerized rates averaged unchanged to only $1/MT higher, but the rate for bulk DDGS was up about $7/MT at the Gulf of Mexico. Another attractive feature of the containerized rates is that they decline on average by approximately $7/MT from May to July. The rate for bulk DDGS to the Gulf of Mexico similarly decline by about $6/MT over that same time period, and even the domestic rates decline by about $4/MT. This condition seems to be incentivizing DDGS buyers to extend some coverage into the future. One merchandiser noted that he sold over 18,000 MT this past week with prices as follows:
- Qingdao: $268 June-July;
- Busan: $264 June-August;
- Lat Krabang: $272; and,
- Haiphong: $282.
A number of Chinese buyers would like to see if still lower DDGS prices can be obtained, as there is some uncertainty regarding the stability of Chinese demand and import policies by their own government. The result is that a number of buyers from China and other destinations such as Vietnam are patiently waiting – but they all seem to appreciate DDGS merchandisers keeping them informed of developing market conditions.
Ethanol Comments: Ethanol stocks remained unchanged from the prior week at 20.8 million barrels, but that condition may soon change because of the decline in seasonal downtime for maintenance. Production for the week ending May 1 fell to an average daily rate of 887,000 barrels per day (bpd), well below the prior week’s average rate of 921,000 bpd and even below the year-ago level of 894,000 bpd. In the meantime, the differential between the price of corn and the spot price of corn and co-products improved slightly across the Corn Belt during week ending May 8, 2015:
- Illinois differential is $2.59 per bushel in comparison to $2.52 the prior week and $3.19 a year ago.
- Iowa differential is $2.30 per bushel in comparison to $2.23 the prior week and $3.01 a year ago.
- Nebraska differential is $2.18 per bushel in comparison to $2.11 the prior week and $2.83 a year ago.
- South Dakota differential is $2.53 per bushel in comparison to $2.49 the prior week and $3.47 a year ago.