Distillers Dried Grains with Solubles (DDGS)
DDGS Comments:
There are increasing inquires about pricing DDGS into the January/February/March period, but selling slowed as both buyers and sellers watched corn futures decline and filtered through various rumors about a potential limited reduction in U.S. ethanol production. If the growth of ethanol production plateaued it would have little effect on the available supplies of DDGS, but it may cause DDGS prices to remain firmer than would occur if ethanol production continued increasing into next season.
The popularity of DDGS has grown as a unique feed protein with energy benefits that requires less bulk volume than standard coarse grains. Asian buyers are particularly interested in logistical cost savings and show a consistent willingness to outbid domestic U.S. buyers of DDGS. Some Asian customers have recently paid in the equivalent of more than 130 percent of corn value based on the December 2013 corn contract at CBOT. However, this week’s additional setback in corn futures may give DDGS merchandisers a little more room to maneuver on price. As a result, domestic end-users of DDGS are likely to express increased interest. Asian buyers may continue to stand as stiff competitors.
Ethanol Comments: An EPA spokesperson is reported to have come out after the close on Friday October 11 and made the following comment in response to market rumors about reduced ethanol production:
‘NO FINAL DECISION ON THE PROPOSED RENEWABLE FUEL STANDARDS FOR 2014’
The spokesperson went on to clarify that EPA at this point is only developing a draft proposal for 2014 RFS and no final decision will be made without giving ever stakeholder the full opportunity to make comments. The statement made no specific mention of any reported proposal to ease 2014 biofuel blending targets.
This information is important because there were active rumors that caused additional price weakness in corn this week. The rumor was that EPA would reduce the volume of corn-based ethanol in 2014 by about 800 million gallons, which would bring the total down from 13.8 billion gallons to 13 billion. This was below what many industry observers were expecting because the law had initially required 14.4 billion gallons for 2014. Supposedly, to justify getting the volume that low, the agency would utilize a waiver under the 2007 law that allows it to scale down required volumes under certain situations, such as a lack of available supply of the fuels or economic hardship. However, that would make absolutely no sense when the United States is in the process of harvesting a record corn crop.