Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: This is the second week in a row of uniform DDGS price increases for domestic and international buyers, with each increasing on average about $12/MT. Merchandisers report that it is primarily domestic demand that is driving the push higher in DDGS values. The domestic buyers are increasing DDGS in their feed ratios as a substitute for expensive soymeal. The nutritionists of domestic end-users are striving to obtain the best costs and an acceptable level of amino acids. DDGS can accomplish this when mixed in the correct proportions. Note: many DDGS merchandisers may be able to forward useful materials about the feeding of DDGS to end-users.
One merchandiser reported that he is presently focusing all of his attention on the domestic market rather than on seeking out Asian demand. However, that perspective is not consistent, as a different merchandiser seemed optimistic that the spread will soon narrow between domestic and Asian bids and the rate of buying volume increases.
Buying volume for feeds normally increases as it becomes evident that a seasonal low has been established. Market participants seem to increasingly be in agreement that the price for corn futures on October 1 is the low for the current 2014/15 season. Consequently, the rate of domestic buying has picked up. However, foreign buyers of DDGS are still finding some of the best deals. For example, buyers from Thailand were able to secure 12,000 MT of DDGS earlier this week at $190-194/MT. That low of a price level was hard to find by the end of this week, but Korea and Vietnamese buyers are actively making offers as they seek out opportunities.
Ethanol Comments: The average daily rate of U.S. ethanol production increased this past week to 937,000 barrels per day (bpd). That is an increase above the prior week’s production level of 896,000 bpd, but that increase is not a factor of concern for the following reasons: It is normal for ethanol production to increase during the corn harvest. The amount of ethanol production during the same week a year ago was 911,000 bpd. The significance of this fact is that there is only a slight increase in this season’s ethanol production during the harvest even though the percentage decline in corn contract prices is sizably larger this season. Additionally promising this season is the fact that there was a substantial decline in total U.S. ethanol stocks from 17.9 million barrels the prior week to 17 million barrels for the week ending October 24. The result is that present stocks levels have fallen back to just 13.9 percent of the year ago level. This process of decline in stocks has continued for several weeks and seems attributable to increased exports.
There was only a slight decrease in the differential between the cost of corn and the return for the co-products of ethanol and DDGS during this past week. It is also noteworthy that the differential is close to year-ago levels. The regional differentials for week ending Friday, October 31, 2014 are as follows:
- Illinois differential is $2.55 per bushel in comparison to $2.66 the prior week and $3.16 a year ago.
- Iowa differential is $2.41 per bushel in comparison to $2.44 the prior week and $2.68 a year ago.
- Nebraska differential is $2.56 per bushel in comparison to $2.57 the prior week and $2.55 a year ago.
South Dakota differential is $2.51 per bushel in comparison to $2.52 the prior week and $2.88 a year ago.