There was divergence in DDGS prices for the U.S. domestic and international markets recently. Domestic DDGS prices all experienced further declines during the week ending June 27, while containerized rates to foreign markets stabilized and even showed small increases into the August/September time period. Such price action in grain markets is commonly synonymous with market adjustments.
One adjustment that merchandisers report is an increasing hesitancy to do business with Chinese end-users due to recent market dynamics. Growing interest in doing business with different buyers has resulted in DDGS being offered at lower values in relation to corn. For the preferred clients, a “new norm” seems to be evolving to price DDGS around 105 percent of the value of local corn, rather than the 120’s that had been previously seen. Considering some of the condensed nutritional values of DDGS, this is attractive pricing.
Two important USDA reports will be published on Monday. The contents of those reports are likely to influence whether DDGS buyers seek more favorable pricing this fall or decide to go ahead and book a larger share of their 2014/15 seasonal needs in the near-term.
Ethanol Comments: Ethanol production declined to an average daily rate of 938,000 barrels per day (bpd) for the week ending June 20. This was a modest 34,000 bpd decline but it seems sufficient to allow the differentials between the spot price of ethanol and co-products to improve in three of the four survey regions across the Corn Belt. Please see the following data.
Stabilization of production seems to have more influence on the spot market differential than does any building of total ethanol stocks. U.S. ethanol stocks increased this past week by 1.9 percent 18.2 million barrels. That is up 11.6 percent from the year ago level of 16.3 million barrels. Present ethanol stocks do not seem to be at levels that call for curtailment of production.
The differential between the cost of corn and the value of ethanol and DDGS at processing plants in different regions of the Corn-Belt are as follows for week ending June 27, 2014:
- Illinois differential is $2.96 per bushel in comparison to $3.16 the prior week and $2.20 a year ago.
- Iowa differential is $2.83 per bushel in comparison to $2.72 the prior week and $1.90 a year ago.
- Nebraska differential is $2.90 per bushel in comparison to $2.73 the prior week and $1.78 a year ago.
- South Dakota differential is $3.27 per bushel in comparison to $3.25 the prior week and $198 a year ago.
Country News
EU: The European barley harvest this year is predicted to be lower than last year’s, but should still be enough to meet requirements, according to Retuers. German analyst FO Licht predicts that the EU’s total barley harvest this year will be some 53 MMT, while the EU’s grain trade association Coceral predicts it will be 55.9 MMT. Regardless, these figures are still down from the 59.6 MMT brought in last year, and will be the smallest barley crop in three years. The EU’s annual barley demand is around 50 MMT.
North Korea: A major drought in North Korea had has forced the government to mobilize its military in an effort to direct dwindling water supplies to its vulnerable crops, reports Reuters. Some areas of the country have not seen rain in over 70 days, which in conjunction with higher-than-average temepratures is causing severe damage to the country’s corn and barley crop.
South Africa: Yellow corn for July delivery in Africa’s largest corn producing country has fallen to $180/MT, which is its lowest level in 16 months, reports Bloomberg News. South Africa is predicted to produce 13.9 MMT of corn this year, which will be the country’s largest crop since the 14.1 MMT harvested in 1981.
Country News
EU: The European barley harvest this year is predicted to be lower than last year’s, but should still be enough to meet requirements, according to Retuers. German analyst FO Licht predicts that the EU’s total barley harvest this year will be some 53 MMT, while the EU’s grain trade association Coceral predicts it will be 55.9 MMT. Regardless, these figures are still down from the 59.6 MMT brought in last year, and will be the smallest barley crop in three years. The EU’s annual barley demand is around 50 MMT.
North Korea: A major drought in North Korea had has forced the government to mobilize its military in an effort to direct dwindling water supplies to its vulnerable crops, reports Reuters. Some areas of the country have not seen rain in over 70 days, which in conjunction with higher-than-average temepratures is causing severe damage to the country’s corn and barley crop.
South Africa: Yellow corn for July delivery in Africa’s largest corn producing country has fallen to $180/MT, which is its lowest level in 16 months, reports Bloomberg News. South Africa is predicted to produce 13.9 MMT of corn this year, which will be the country’s largest crop since the 14.1 MMT harvested in 1981.