Distillers Dried Grains with Solubles (DDGS)
Both domestic and foreign DDGS prices increased by approximately the same amount this past week. On average, November increased about $9/MT. The size of increases then declined into the future with December prices for both domestic and international averaging up about $7/MT and January up about $4/MT.
A number of Asian buyers are testing the market and bidding prices that are about $20 under offers. They recently had some success as DDGS merchandisers with the largest excess supplies were forced to temporarily undercut the competition. However, more and more domestic DDGS buyers are making slightly higher offers than their foreign counterparts. This is one reason for the increasingly similar price changes for both domestic and foreign buyers. A second reason for the similar changes in price seems to be that burdensome stock levels are slowly being reduced. However, there is still abundant DDGS inventory that needs to be moved.
DDGS merchandisers seem intent on offering the best prices to their better clients. Domestic buyers seem to be aware of the conditions and make payments on time, accepting product without complaint. However, an advantage that foreign buyers have is that they purchase in larger volumes than some of the local domestic buyers who purchase hand-to-mouth. As a result, Thai buyers were successful this week in purchasing about 4,000MT to Lat Krabang/Laem Chabang in the price range of $180-182. As well, a major Taiwanese feed mill won a tender at $170 for Kaohsiung. Buyers from Korea attempted to purchase even lower, but without success. Even though plenty of opportunities exist, domestic buyers will outbid their Asian counterparts at a certain level.
Ethanol Comments: Two positive developments took place this week in the U.S. ethanol market. First, there was a substantial one week reduction in total ethanol stocks by 2.3 percent as stocks declined from 18.4 million barrels down to 17.9 million barrels for the week the ending October 17. This sizable reduction seems to indicate that exports have picked back up because it occurred even as the weekly rate of production increased from a level of 885,000 barrels per day (bpd) up to 896,000 bpd.
The second favorable development is that there was a rather sizable rebound in the differential between the cost of corn and the return for the co-products of ethanol and DDGS. The regional differentials for the week ending Friday, October 24, 2014 are as follows:
- Illinois differential is $2.66 per bushel in comparison to $2.29 the prior week and $3.26 a year ago.
- Iowa differential is $2.44 per bushel in comparison to $1.96 the prior week and $2.92 a year ago.
- Nebraska differential is $2.57 per bushel in comparison to $2.01 the prior week and $2.71 a year ago.
- South Dakota differential is $2.52 per bushel in comparison to $2.12 the prior week and $3.13 a year ago.