DDGS Comments: Buyers of DDGS should be alerted to the fact that Monday’s WASDE report was supportive for future corn prices. As a result, there may no longer be an opportunity to buy corn at price levels that were being offered a month ago. DDGS merchandisers reported that offers for the first quarter of 2015 went up by $15-20/MT after the November WASDE was published. However, DDGS buyers should note that there could still be a limited setback in corn futures contracts, if there is a near-term setback in soymeal prices. Corn is not expected to decline at the same rate as soymeal, but a setback in meal could momentarily create a window of opportunity to purchase DDGS.
A near-term opportunity may exist because there are still several ethanol plants with pent-up supplies of DDGS inventory that is being offered at favorable prices (FOB the plant). Those larger-than-normal inventories of DDGS at various ethanol plants have accumulated because of logistical issues. Those are the same logistical issues that have caused soymeal prices to escalate to the present high price levels. Those issues now seem to be in the process of being resolved. Consequently, that is the reason for the expectation that soymeal prices could soon experience a sudden setback.
The spread between the price of soymeal and DDGS has become extremely wide. Therefore, the price of corn and DDGS is not expected to decline in proportion to soymeal. As well, the correction of the logistical problems should start to allow DDGS inventories to begin flowing in a much more orderly manner in the next month or two. Overall prices could start to strengthen at that point, but in the short-term DDGS buyers still have opportunities if they shop around.
Ethanol Comments: The differential between the cost of corn and the return for the co-products of ethanol and DDGS has steadily improved for the past few weeks, and that trend has continue for the week ending Friday, November 14, 2014.
- Illinois differential is $3.73 per bushel in comparison to $3.26 the prior week and $3.25 a year ago.
- Iowa differential is $3.36 per bushel in comparison to $2.80 the prior week and $2.51 a year ago.
- Nebraska differential is $3.50 per bushel in comparison to $2.76 the prior week and $2.33 a year ago.
- South Dakota differential is $3.42 per bushel in comparison to $2.76 the prior week and $2.62 a year ago.
Unfortunately, the price favorability of ethanol to wholesale gasoline has come to an end in different regions of the United States. This fact could have an unfavorable impact upon ethanol exports, which has acted as a relief-valve for surplus stocks.
Present U.S. ethanol stocks are 17.7 million barrels, which is about 16.8 percent larger than the year-ago stocks level of 15.2 million barrels. Margins on ethanol production seem to noticeably decline when stocks exceed year-ago levels by more than 20 percent. It may not take much time to get to that point because ethanol production has recently been on the increase. Average daily ethanol production was 946,000 barrels per day (bpd) for during week ending November 11. The prior week’s production level was 927,000 bpd and the year ago level was 927,000 bpd.
Country News
Argentina: Rains across the Pampas grain belt will likely further delay corn planting, according to Reuters. Prior to this recent deluge, Argentina’s corn planting was already behind due to rain showers earlier in the month.
China: China Natioanl Grain and Oils Information Center has reported that China has increased the amount of corn it imports from Ukraine under the auspices of a loan for grain deal struck between the two countries in 2012, reports Reuters. An additional 1.14 MMT of corn has been purchased since October, which brings the total amount of corn purchased from Ukraine to 1.32 MMT.
France: The Agricultural Ministry announced that it is raising the estimate for this year’s corn harvest to a record high following favorable weather, according to Reuters. It is now believed that French farmers will bring in 16.95 MMT of corn, which is up from the 16.31 MMT estimated in October. The largest corn crop France has ever produced was 16.75 MMT in 1997.