Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: DDGS prices have taken a firmer tone this week despite light trading. Reports suggest most forward buying is light with purchasers waiting for a market bottom before aggressively filling their needs. Despite firmer pricing, DDGS are finding ways to remain competitive against soybean meal in livestock rations. On a per protein unit basis, the cost of DDGS is near $4.32 versus $6.35 for soybean meal, making it an attractive feedstuff. DDGS production will start to increase again as the seasonal fall maintenance period comes to a close, providing an opportunity for end users to procure product at attractive prices.
Internationally, Vietnam has been a buyer of November shipments and some sales to China have been noted as well. Taiwan and South Korea are reportedly expressing interest in procuring U.S. DDGS but executed trades have been small in number so far. Vietnam is requesting U.S. exporters alter some phytosanitary procedures which may temporarily give sales preference to other buyers of U.S. DDGS.
Ethanol Comments: Ethanol margins are lower and caused plants to cut production nearly 20,000 barrels per day from last week, with production reaching only 0.962 million barrels per day. The production slowdown drew down ethanol stocks by 784,000 barrels to 19.393 million. Further helping draw down stocks was a week-over-week increase in gasoline consumption of 177,000 barrels per day. The mixed report, declining production and increasing usage, sets up a bullish scenario for late-season ethanol demand in the U.S.
The margin between the corn price and the value of ethanol and coproducts was lower this past week across three of the four reference markets (see below), with the largest losses noted in Iowa and South Dakota. Compared to this same week last year, the spread is $0.31-$0.54 higher in all reference markets.
- Illinois differential is $2.18 per bushel, in comparison to $2.34 the prior week and $1.64 a year ago.
- Iowa differential is $2.03 per bushel, in comparison to $2.24 the prior week and $1.47 a year ago.
- Nebraska differential is $1.93 per bushel, in comparison to $1.93 the prior week and $1.62 a year ago.
- South Dakota differential is $2.05 per bushel, in comparison to $2.41 the prior week and $1.71 a year ago.