Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Spot market prices for DDGS were largely unchanged this past week, but prices declined for purchase into the future. For example, there was no change in the nearby price for containerized DDGS, though prices one to two months into the future declined on average by $9/MT. As well, there was a consistent $5/MT reduction in DDGS prices for anyone purchasing bulk delivery to the Gulf. In contrast, the domestic buyers who predominately like to purchase in the spot market saw all of their prices increase modestly during the past week.
Many domestic buyers seem to be watching for a potential harvest bottom to occur in corn prices before they purchase bulk DDGS for rail shipment. Of course, obtaining a favorable freight rate is the other side of the coin that must be timed correctly. Both rail and barge rates can increase as demand picks up during grain harvest. Therefore, it can be particularly advantageous for DDGS buyers to work in conjunction with merchandisers to secure the best combinations of prices for the future. Such a partnership can be particularly beneficial for foreign buyers who are less familiar with the U.S. rail and barge systems than are the DDGS merchandisers.
Ethanol Comments: The Brazilian Real is a currency that has been in sharp decline against the U.S. dollar since last fall and has lost more than 25 percent of its comparative value. Nevertheless, the United States has maintained its status of the world’s largest exporter of ethanol. Recent demand from nations such as Canada, South Korea, India and the Philippines has all exceeded Chinese purchases of U.S.-produced ethanol.
U.S. ethanol exports in July were up 26 percent over the average of the prior three months, keeping the nation in the top spot globally for overseas sales. World trade in biofuels has been rising and while historically volatile on a month-to-month basis, U.S. exports have been relatively more consistent over the past year.
Please note that the U.S. Energy Information Administration (EIA) does not maintain a data series of weekly U.S. ethanol exports, but they do monitor the weekly changes in ethanol stocks, production and imports. The composite of changes in these other data series can imply that U.S. ethanol exports are either increasing or decreasing. For example, the most recent data for week ending August 28 shows that total U.S. ethanol stocks increased by 2 percent to 19 million barrels, up from the prior week’s level of 18.6 million barrels. This increase occurred as there was a slight reduction in the average daily production rate of 948,000 barrels per day (bpd), down slightly from the prior week’s level of 952,000 bpd. One primary reason for the increase in total stocks is because ethanol imports more than offset the decline in production; U.S. ethanol imports averaged 12,000 bpd during the week ending August 28. Considering this combination of data, a more sizable increase in ethanol exports is necessary in order to cause a further decline in total U.S. ethanol stocks.
Current abundant ethanol stocks are a primary reason for the narrow differential between the cost of corn and the co-products; that differential is the following for the week ending September 4, 2015:
- Illinois differential is $1.72 per bushel, in comparison to $1.64 the prior week and $3.58 a year ago.
- Iowa differential is $1.57 per bushel, in comparison to $1.63 the prior week and $3.40 a year ago.
- Nebraska differential is $1.44 per bushel, in comparison to $1.45 the prior week and $3.25 a year ago.
- South Dakota differential is $2.22 per bushel, in comparison to $2.15 the prior week and $3.91 a year ago.