Distillers Dried Grains with Solubles (DDGS)
DDGS Comments: Strong exports continue to drive the DDGS market with demand from China, Mexico and Canada leading the way. Merchandisers report that some buyers are now requesting prices for all of 2014. Chinese buyers seem to be requesting lower prices while buyers from Vietnam are keeping up with the offers. Domestic U.S. buyers continue to be somewhat frustrated with DDGS values in relation to CBOT futures contacts and they are not keeping up with present price levels for the January-March period.
There are reports of good container loading out of Oakland for January-June delivery and out of Savannah for the January-September period. Asian buyers remain active sales at the following price levels:
– Qingdao/Shanghai: $323 JAN – MAR
– HCMC $335 JAN & FEB
– Haiphong $338
Ethanol Comments: In order to alleviate potential problems that could occur due to current gasoline consumption being less-than-expected when the Renewable Fuel Standard (RFS) was implemented in 2007, the Environmental Protection Agency (EPA) proposed making limited reductions to the mandated amount of corn-based ethanol consumption and larger reductions in mandates of cellulosic ethanol production. The intent is to avoid any problems with the “blend wall” thath could occur if the annual requirement mandated by Congress is greater than the 10 percent amount of ethanol that can be mixed into conventional blends of gasoline.
The initial diagnosis is that the mandate for minimum corn-based ethanol production could decline from the 2013 production level of 13.8 billion gallons to between 12.7 billion and 13.2 billion gallons in 2014. It should be noted that the EPA stressed there is a continued commitment to promote U.S. biofuels. As well, this is a “proposal” on the part of the EPA, which will be open for 60 days of public comment before being made final next year.
Ethanol production will continues to have a market both domestically and abroad. Ethanol production for the week ending November 8 averaged 927,000 barrels per day (bpd) in comparison to the prior week of 920,000 bpd. Total U.S. stocks remained unchanged from week to week at 15.2 million barrels, which is 15.1 percent below year ago. The differentials between corn and the co-products values indicate that ethanol producer margins remain favorable cross the Corn Belt:
– Illinois differential substantially increased to $3.24 per bushel, which is up from $2.64 the prior week and above $1.56 for this same week a year ago.
– Iowa differential increased to $2.51 per bushel, which is up from $2.28 the prior week above $1.35 for this same week a year ago.
– Nebraska differential increased to $2.30 per bushel, which is up from $1.88 the prior week and above $1.65 for this same week a year ago.
– South Dakota differential decreased to $2.62 per bushel, which is down from $2.88 the prior week but well above $1.51 for this same week a year ago.