Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Asian buyers have dominated the export market for DDGS, but buyers from other global regions are showing increased interest. For example, one DDGS merchandiser reported that he made a sale this week for containerized DDGS to Qatar in the Middle East. This is a trial order, but that is the same way Asian buying began.
Central American buying of DDGS also began on a trial basis, and now there is growing interest from buyers in Colombia, Venezuela, Peru, Ecuador and Panama. Peruvian dairies have shown particular interest in DDGS, and demand there may grow exponentially once a few logistical bottlenecks are worked out.
Speaking of logistics: This past week a DDGS merchandiser was visiting several container transloaders in the Chicago area and they reported to him that they were fully booked up. They were curious how long this movement would last. That is obviously a difficult question to answer, but several merchandisers do report that the recent influx of Asian buying is starting to slow down. Many foreign buyers have satisfied their immediate needs and are now looking forward into the January/February/March period. There is also reported to be some limited interest in the April/May/June period. Such inquires make sense, as recent speculative selling has driven down the nearby December 2013 corn contract, and that movement in turn pulls down the more distant 2014 contracts (please see preceding outlook discussion).
Ethanol Comments: The importance of ethanol to the U.S. economy is evidenced in meeting schedules at the White House. Since the U.S. Government returned to duty on October 21, at least 17 meetings have taken place at the White House to discuss biofuel policies, as reported by Reuters. About 70 percent of the meeting attendees are supporters of biofuel interests. The skills of these negotiators may become more evident next week – potentially the after the WASDE is published on Friday, November 8 2013.
USDA’s current estimate is that 4.9 billion bushels of corn will be used in the production of ethanol and co-products. It may be premature for USDA to alter this number in next week’s WASDE because any public announcement by EPA is expected to still be a draft proposal that is open to potential changes. Any proposal from EPA may discuss volume requirement for both 2014 and 2015.
Total U.S. ethanol production for the week ending October 25 averaged 911,000 barrels per day (bpd), which was higher than the prior week’s production of 897,000 bpd. Imports remain zero, which helps contribute to the slight decline in U.S. ethanol stocks to 15 million barrels. This was down about 3.5 percent from the prior week’s level of 15.5 million barrels. It is interesting to note that ethanol stocks at this time last year were more than 22 percent larger, at 19.2 million barrels. The substantial difference in stocks is a primary reason for the annual difference between corn and the co-product values below:
– Illinois differential decreased to $3.16 per bushel, down from $3.26 the prior week but above $1.54 for the same week a year ago.
– Iowa differential decreased to $2.68 per bushel, down from $2.92 the prior week but above $1.30 for the same week a year ago.
– Nebraska differential decreased to $2.55 per bushel, down from $2.71 the prior week but above $1.47 for the same week a year ago.
– South Dakota differential decreased to $2.88 per bushel, down from $3.13 the prior week but above $1.61 for the same week a year ago.