Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices have worked their way into feed rations by remaining competitive with corn and soybean meal. The drop in CBOT corn prices has stimulated competition in the feedstuffs sector and ethanol plants and DDGS merchandisers are finding ways to move product. On a per protein unit cost basis, DDGS are still over $2.20 cheaper than competing soybean meal which has seen upward price pressure in recent weeks. Most buyers have secured product for immediate needs and some merchandisers are turning their focus to other commodities. Prices for Lethbridge, Alberta were higher this week, leading the North American market.
Internationally, spot shipments are continuing to hold their value as pre-December demand remains strong. December shipment prices are largely flat due to holiday-induced demand reductions before they rise again in January. Prices for 40 foot containers destined for Southeast Asia increased $3/ton this week with prices for the Philippines increasing $7/ton. With the forward curve in its current shape, the average $196/ton price to Asian destinations could be upwards of $205 by February.
Ethanol Comments: Continued strength in ethanol margins was created as production fell 20,000 barrels from the prior week to 1.002 million barrels per day. Ethanol demand increased 2 percent last week, reaching 20.191 million barrels per day, which drew down ethanol stocks to 19.229 million barrels, a 3 percent decrease from one week earlier.
The latest WASDE forecast increased corn used for ethanol by 25 million bushels with the new total reaching 5.3 billion bushels. The figure is slightly ahead of the 5.026 billion bushels used during the previous marketing year. The corn use estimate is on-track with the higher-than-expected ethanol grind that has occurred so far this year.
While an army of analysts will continue to figure out what a Trump Presidency means for agriculture at large and specifically for ethanol, initial reactions are positive for the industry. Ethanol refiners are hopeful the new administration will ease Renewable Fuels Standard requirements for blending ethanol with gasoline or purchasing RIN credits. However, any changes are likely to be slow to appear and take effect as Trump will walk a policy tightrope between his Iowa-corn-farming and oil-and-refining-industry supporters.
The margin between the corn price and the value of ethanol and coproducts was higher this past week in three of the four reference markets (see below). Compared to this same week last year, the spread is roughly $0.54 higher in all reference markets.
- Illinois differential is $2.17 per bushel, in comparison to $2.15 the prior week and $1.70 a year ago.
- Iowa differential is $2.05 per bushel, in comparison to $2.06 the prior week and $1.47 a year ago.
- Nebraska differential is $2.22 per bushel, in comparison to $2.16 the prior week and $1.71 a year ago.
- South Dakota differential is $2.27 per bushel, in comparison to $2.24 the prior week and $1.67 a year ago.