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DDGS Market Perspectives May 2, 2014

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Publish time: 8th May, 2014      Source: Grains Council
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    DISTILLERS DRIED GRAINS WITH SOLUBLES (DDGS)
    
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    DDGS Comments: The DDGS sales to foreign locations were somewhat spotty this week because much of the world celebrates May 1 as a holiday. Merchandisers reported that prices were rather erratic in the spot market because many foreign DDGS buyers are temporarily out of the market. However, Vietnamese buyers did step into the market this week and made some purchases for the June and July period.
    
    In relation to containerized DDGS sales to Vietnamese buyers: an important factor is that their domestic administrators have become much more aggressive in monitoring container weights. Vietnamese buyers have been notified that effective immediately, under no condition are weighs to exceed the following requirements:
    
     Container 20 not to exceed 18 tons.
    
     Container 40 not to exceed 23 tons.
    
    Merchandisers report that they are starting to see some price weakness in U.S. domestic markets as more cattle are put on pasture and because of the reduced swine herd due to the PED virus. DDGS delivered by rail to the west coast, California and Pacific North West (PNW), experienced the largest declines this week of more than $10 per metric ton. Please note that West Coast rail-delivered DDGS also have the largest price declines into mid-summer. Price declines are less pronounced for DDGS being transported to the Gulf region and rates to inland Texas experienced little decrease.
    
    This week`s DDGS price declines became more pronounced after futures prices experienced a setback. Some DDGS merchandisers are still wondering if there will be a repeat of last season？s surge in prices while other merchandisers are far less confident that such an event will happen again this season. As a result, buyers may need to speak with various merchandisers in order to do some comparative shopping.
    
    Buyers may also want to work with merchandisers in investigating different logistical arrangements. For example, there is supposedly a certain amount of DDGS that are moving to Asian markets by barge. Most of these purchases were sold a while ago as a combination of bulk cargoes. It presumably will take some investigative initiative to determine if similar opportunities can be arranged in the future.
    
    Ethanol Comments: The level of U.S. ethanol stocks at 17.2 million barrels was 1 percent above the year-ago level of 17 million barrels. This newly released data by the Energy Information Agency (EIA) is significant in that this is the first year-over-year increase in total U.S. ethanol stocks since the end of 2012. That is a substantial amount of time for ethanol stocks to consistently remain below the year-ago level, and that pattern obviously could not go on indefinitely.
    
    There was a slight decline in the week-to-week production level of ethanol from an average daily rate of 910,000 barrels per day (bpd) in the prior week to the more recent rate of 898,000 bpd. Ethanol imports have also fallen back to zero. Therefore, the substantial increase in stocks for the past two weeks presumably has more to do with a temporary lull in demand than excessive production. Domestic fuel demand may increase somewhat as summer activities get back into full swing.
    
    Recent strong margins have enabled several publically traded ethanol companies to outperform analyst expectations. Ethanol producer margins continue to work down from recent lofty levels, but the reported differentials between corn and co-products imply that profitability remains strong across the Corn Belt. The regional differentials for the week ending May 2 are as follows:
    
     Illinois differential is $3.67 per bushel, in comparison to $4.29 the prior week and $2.39 a year ago.
     Iowa differential is $3.28 per bushel, in comparison to $3.92 the prior week and $2.26 a year ago.
     Nebraska differential is $3.07 per bushel, in comparison to $3.64 the prior week and $2.38 a year ago.
     South Dakota differential is $3.69 per bushel, in comparison to $4.20 the prior week and $2.19 a year ago.
    
    
    
    COUNTRY NEWS
    
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    Russia: Russia is set to more than double its corn exports in 2013/14, according to All About Feed. It is estimated that exports will jump to 4.15 MMT, which is a significant increase over the 1.93 MMT seen last year. Total Russian grain exports could total 24.5 MMT, which is up from last year？s 22 MMT.
    
    South Africa: Africa？s largest corn producer announced that exports have risen 13 percent compared to last year, reports Bloomberg News. Corn shipments totaled 2.04 MMT in the marketing year ending on April 25, which compared with 1.81 MMT the year before. Japan was the largest importer of South African corn at 596,315 MT, with Zimbabwe following at 283,533 MT.
    
    Ukraine: Ukrainian farmers are looking for assistance from the IMF as the continuing tensions with Russia have made lending conditions much more difficult, according to Reuters. This credit crunch came during the spring planting season and forced some farmers to purchase cheaper seeds and reduce their use of fertilizers. The IMF？s Board of Governors convened on April 30 to consider a Ukrainian aid package following a tentative agreement in March to provide Ukraine with a two year aid package totaling $14-18 billion.