Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Buyers of DDGS seem to recognize that it is common for grain prices to stabilize once harvest is more than 50 percent complete. Since that point in time is near, increasing attention is being paid by market participants to chart patterns in order to create purchasing strategies. For example, DDGS merchandisers report that Chinese buyers are slowly returning to the market and seeking DDGS offers for prices in the first quarter of calendar year 2016. Other Asian purchasers of DDGS seem anxious to stay ahead of this potentially significant competition, and there have been sales to firms from Vietnam, Korea and Thailand at the recent low prices.
Domestic purchases of DDGS normally increase for the feeding of cattle as cooler weather approaches, but feedlots often prefer to buy immediate needs in the nearby spot market. The lack of extended coverage makes it much more difficult for these domestic end-users to take advantage of seasonal lows. The result is that their current costs for feed are often less but their total costs for the season are more.
Ethanol Comments: USDA’s October estimate of corn used in ethanol and co-product production was unchanged from the September estimate of 5.250 billion bushels. This projection implies stable grow in demand as total corn use for ethanol increases from 5.124 billion bushels in the 2013/14 season and 5.207 billion bushels in 2014/15. The assumption makes sense when considering the fact that the price of crude oil appears to be stabilizing into a horizontal trading range and at levels that will encourage strong consumption of gasoline. However, the following data also implies that competition is keeping ethanol stocks ample, and that may cause margins to remain thin for ethanol producers.
Total U.S. ethanol stocks increased slightly for week ending October 9, 2015 to 19 million barrels. This is slightly above the week-ago level of 18.8 million barrels and 3.3 percent above the year-ago level of 18.4 million barrels. Maintaining these stocks was a steady average daily production rate of 949,000 barrels per day (bpd). This rate of production is basically unchanged from the prior week’s average of 950,000 bpd. The result was a limited but consistent decline in the reported differential between the price of corn and co-products across the U.S. Corn Belt. The following data shows differentials in the four regions of the Corn Belt for the week ending October 9, 2015:
- Illinois differential is $1.64 per bushel, in comparison to $1.72 the prior week and $2.06 a year ago.
- Iowa differential is $1.47 per bushel, in comparison to $1.54 the prior week and $1.94 a year ago.
- Nebraska differential is $1.62 per bushel, in comparison to $1.70 the prior week and $1.72 a year ago.
- South Dakota differential is $1.71 per bushel, in comparison to $1.74 the prior week and $1.97 a year ago.