DDGS Comments: Data from USDA''s Economic Research Service shows that the average price of DDGS in Central Illinois could be bought at the door of an ethanol plant for $96 per U.S. short ton in October of 2014. The favorability of this price becomes apparent when considering that in October of 2012 and 2013 that same DDGS was selling for $278 and $216.50 per short ton, respectively. In other words, DDGS prices in October of this year were less than half of the prior year''s prices.
In 2012, DDGS prices declined from the average October price of $278 to a November average of $259 and then steadily worked back up to $271 in February. In 2013, DDGS prices remained flat from October through December and then sold off an additional $20 in January before working steadily higher into March. In this current season, DDGs prices have strengthened from October to November.
The ratio of DDGS to corn has remained much more favorable this season than the prior two years. However, that ratio is expected to change if Chinese buyers return to the DDGS market. That comment is made because several different sources are reporting that there have been some Chinese interest for the JFM period of 2015, but so far that remains a rumor. Yet, something seems to be happening because DDGS merchandisers report that Asian prices for DDGs have recovered. Just 4-5 weeks ago, DDGS prices in the Asian market was discounted by $25-30/MT. Now, they are selling $5-10/MT premium over domestic prices. In the meantime, movement continues as there was a sale of 5,000 MT to HCMC at $235-238/MT for the December-March time frame. There were also sales to Kaohsiung, Taiwan at $240 and Surabaya, Indonesia for $238. Amounts were unspecified.
Domestically, prices were up $4-5/MT this week as the barge market is up a bit. Better logistics is allowing product to return to the market, and there was good movement to California. Domestic buyers remain active because the price relative to corn remains on the low end of the historical range.
Ethanol Comments: The national average price of gasoline has declined down to the lowest levels seen since December 2010, and futures contracts are implying that prices will remain soft right into year-end. Ethanol producers recognize that such price conditions can weaken the prospect of ethanol exports. Exports have been important this past year in syphoning off excess stocks, which has allowed ethanol producers to maintain favorable margins and production.
The Energy Information Administration (EIA) is presently estimating that U.S. ethanol production in calendar year 2015 will average 934,000 barrels per day (bpd). That daily production rate would be 7,000 bpd above the 2014 forecast of 927,000 bpd. The 2015 rate of production could end up being less if ethanol producer margins weaken, but current data is not concerning.
The latest weekly ethanol production rate averages 970,000 bpd for week-ending November 14. That was above the prior weekly rate of 946,000 bpd and the year ago rate of 904,000 bpd. The positive news is that weekly stocks declined in that same period from 17.7 million barrels the prior week down to 17.3 million barrels. Additionally positive is the fact that the most recent stocks level has fallen to 15 percent above the year ago stocks level of 15.1 million barrels.
The differential between the cost of corn and the return for the co-products of ethanol and DDGS improved this past week. Improvements are consistently above the prior week for Friday, November 21, 2014.
- Illinois differential is $4.12 per bushel in comparison to $3.73 the prior week and $4.74 a year ago.
- Iowa differential is $3.89 per bushel in comparison to $3.36 the prior week and $4.08 a year ago.
- Nebraska differential is $3.95 per bushel in comparison to $3.50 the prior week and $3.94 a year ago.
- South Dakota differential is $4.04 per bushel in comparison to $3.42 the
Country News
China: China has announced that it will reduce and/or remove tariffs on a wide variety of Australian agricultural products, including barley, According to Bloomberg News.
EU: Farmers in the EU have brought in a record 70 MMT of corn this year because of good rainfall throughout the summer, according to Reuters. France had a record setting crop of 18 MMT, with an average yield of 10.7 MT per acre. However, initial reports indicated that the quality of European corn is mixed this year, which could make it difficult to market.
Iraq: The Iraqi government believes that the Islamic State has stolen around 1 MMT of grain from northern Iraq and stockpiled it in the Syrian cities of Raqqa and Deir al-Zor, reports Reuters. During their June offensive, militants seized government grain silos in the provinces Nineveh and Slahadeen, where 40 percent of Iraq’s barley is grown.
Further on Iraq. Reuters reports that the chief of the country’s Grain Board has been removed from his posting less than a week after being appointed.
Ukraine: The Ukrainian government has announced that the 2014 grain harvest is 97 percent complete, according to Reuters. Farmers have brought in 62 MMT this year, with an average of 4.31 MT per hectare. Corn made up 25.5 MMT of this year’s grain total, and 7.6 MMT of barley was harvested.
prior week and $3.98 a year ago.