Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: U.S. DDGS prices are $3-5/MT higher this week as the explosive corn and soybean meal markets gave merchandisers room to increase asking prices. Kansas City soybean meal jumped $25/ton this week, and FOB ethanol plant DDGS prices increased accordingly. The soybean meal/DDGS price dynamic heavily favors DDGS on a per-protein unit cost basis: DDGS are now $2.16 cheaper than soybean meal. This represents a $0.47 per-protein unit cost advantage gain since last week.
FOB NOLA DDGS prices jumped up $10/MT this week to $166.80. FOB NOLA corn prices rose by an equal amount to $166.75, keeping the DDGS/corn price ration at 100 percent. This metric is still below historic norms and may signal additional price appreciation potential for DDGS.
Merchandisers are reporting container trade has been slow surrounding the Independence Day holiday but the barge market has firmed (up $8/MT to $153). Prices for 40-foot containers to Southeast Asia were stable this week, as they have been for the past two weeks, averaging $183/MT. The forward curve for July, August, and September shipments to Southeast Asia is comparatively flat, with July and August priced equally and September $2/MT higher. This may signal steady demand for the next two months before increasing in early fall.
The slower export pace discussed in this publication for several weeks now is reflected in the latest U.S. export data. U.S. DDGS exports fell from their April levels, totaling 742,043 MT. Mexico was the top DDGS buyer, importing 134,000 MT, down from April. Exports to Canada and Thailand increased, however, and both countries were in the top five importers for May.
Looking forward, the corn and soybean meal markets will exert an abnormally large influence on the DDGS market. Fundamentals are bearish for corn but farmers are reluctant sellers now, thinking they will see higher prices. Higher soybean meal prices will also support higher DDGs prices. Ethanol margins remain thin but positive; estimated Iowa margins are $0.27/bushel this week. Narrow margins should help restrict DDGS supplies going forward.