Distillers Dried Grains with Solubles (DDGS)
DDGS Comments:
Logistical factors within the United States seem to be influencing current DDGS prices and availability. Truck transportation is hard to find during the middle of harvest and so is access at many of the barge loading facilities. Volume is heavily booked into Chicago and the Gulf and difficulty in finding available trucks has the potential to skew sales figures for DDGS merchandisers. The result is that the domestic spot market is somewhat inverted and is trading mostly $5 higher week to week.
Light international sales were reported to Japan and Taiwan for December, and Chinese buyers are returning with increased inquiries for the first quarter of CY2014. However, merchandisers are finding it difficult to meet price requests that various Asian buyers are seeking for the January/February/March period. Buyers who are seeking still lower DDGS prices may need to wait and see if the November 8th WASDE holds any additional bearish surprises that can drive corn futures even lower. However, DDGS merchandisers may find it difficult to offer substantially lower prices even if the report is decidedly bearish, because many ethanol facilities and end-users are locking in current corn price levels. They are doing so because active selling by speculators is presently offering them the opportunity to secure favorable margins, and they recognize that if the November 8th WASDE does not contain decidedly bearish data, then there will be a large number of speculative sellers who will desire to exit their short corn positions.
Market discussion is that recently purchased DDGS volume is just now starting to hit some of the Chinese ports, such as Qingdao. Several vessels filled with DDGS are in the process of being unloaded in China. These vessels seem to be entirely spoken for, traders report that there is a substantial amount of containerized DDGS that were purchased for speculative purposes. Competitive selling of these stocks could momentarily press down the local spot market for DDGS. As a result, Chinese DDGS buyers are likely to have particular interest in the market factors that will influence U.S. DDGS prices into the first and second quarter of 2014.
Ethanol Comments: Favorable ethanol producer margins have allowed total U.S. ethanol production to rebound to its highest level in more than a year with an average of 897,000 barrels per day (bpd). That was above last week’s production rate of 869,000 bpd and a sizable 12 percent above the rate a year ago of 801,000 bpd. Nevertheless, U.S. ethanol stocks of 15.5 million barrels are only slightly above the prior-week’s level of 15.4 million barrels and down a substantial 17.4 percent below the year-ago level of 18.8 million barrels. Another favorable factor is that ethanol imports have declined back to zero, and there have been no ethanol imports for the past three weeks.
There was a slight decline in the differentials between corn and the co-product values this week in the four reporting areas cross the Corn Belt:
– Illinois differential decreased to $3.26 per bushel, which is down slightly from $3.41 the prior week but well above $1.61 for this same week a year ago.
– Iowa differential decreased to $2.92 per bushel, which is down slightly from $3.04 the prior week but well above $1.51 for this same week a year ago.
– Nebraska differential decreased to $2.71 per bushel, which is down slightly from $2.93 the prior week but well above $1.68 for this same week a year ago.
– South Dakota differential decreased to $3.13 per bushel, which is down slightly from $3.28 the prior week. No data is available for the same week a year ago.
Please note that inaccurate rumors were spread the past couple weeks about potential changes that the EPA would make to RFS policy. However, it is correct that EPA will soon open discussions about RFS volume requirements for 2014. The key point to note is that any announcement will be in the form of a draft proposal that is open to discussion and nothing is being presented as new legislation that is written in stone. The public will have ample time for the voicing of opinions.