Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Domestic DDGS prices remained basically unchanged while the price of exported containers had an average increase of $7/MT in the nearby spot market. The opposite happened last week, as domestic DDGS prices increased by about $3/MT while international containerized prices declined by an additional $4/MT. When averaged over several weeks, the price changes that are being offered to domestic and foreign DDGS buyers are rather uniform. Of course, logistical cost is always one determinant in pricing the total cost to various destinations. There is also one other extremely important consideration – the reliability of the buyer in making payments.
DDGS merchandisers will work hard to maintain a relationship with any buyer who promptly pays for inventory. Recent events have forced some DDGS merchandisers to reposition a number of containerized cargoes that were sent to Southeast Asia. The merchandisers found no shortage of new buyers willing to assume ownership of the containerized DDGS. Merchandisers naturally want to be hospitable in building new business relationships and desire to show trust. Unfortunately, a few buyers will periodically break that trust, but DDGS merchandisers talk among themselves. Word quickly gets out about who are the truly dependable buyers and they receive a price advantage.
Ethanol Comments: Management of ethanol facilities across the Corn-Belt uniformly considered various purchasing strategies as they watched corn prices hit new lows this week. There was some talk among market participants about the weak basis at the Gulf of Mexico, but most ethanol plants are more focused upon their own local basis. They are often closer to the pulse of the market than are speculative traders in Chicago.
Ethanol facilities in the upper Corn-Belt are keeping an eye on the prospect of cooler temperatures occurring in the next two weeks in Minnesota, the Dakotas and maybe even down to northern Iowa. They are also keeping an eye on factors such as precipitation amounts and changing acreage in South America, all of which are likely to have some influence on corn prices this fall.
Ethanol facilities desire to lock in favorable margins at the most opportune time. There was an improvement in the differential between the cost of corn and the co-products for ethanol facilities in three of the four regions across the Corn-Belt for week-ending Friday, September 5, 2014:
- Illinois differential is $3.58 per bushel in comparison to $3.41 the prior week and $3.31 a year ago.
- Iowa differential is $3.40 per bushel in comparison to $3.32 the prior week and $2.97 a year ago.
- Nebraska differential is $3.25 per bushel in comparison to $3.28 the prior week and $3.30 a year ago.
- South Dakota differential is $3.91 per bushel in comparison to $3.80 the prior week and $3.19 a year ago.