DDGS Comments: Domestic prices for bulk DDGS averaged about $3.00/MT higher during this past week. The largest price increases were for DDGS delivered by rail to California. Those increases are presumably related to West Coast congestion and issues involving shipment execution. The East Coast of the U.S. has also had a few shipment issues.
In contrast, the price for containerized DDGS to foreign destinations declined on average by about $5.00/MT. There were some limited sales this week of 500 MT for both April and May to the Vietnamese port of Haiphong at $320/MT, CFR. Otherwise, several merchandisers reported that the markets was relatively quiet as various Asian buyers were hoping DDGS prices would be forced even lower in order to remain competitive with declining soybean meal and rape seed meal prices in China. Of course, those buyers presumably also recognize that a greater influence on DDGS prices results from the action of corn contract at the CBOT.
It is possible that buying of containerized DDGS will momentarily increase next week so that purchases can be arranged before the Chinese New Year begins on February 19. The reduced demand during Chinese New Year may create an opportunity for domestic U.S. buyers of DDGS and buyers from other foreign locations such as Japan, Mexico and Central America.
Ethanol Comments: There continues to be no more cost effective means to boost octane in gasoline than ethanol. So long as that remains the case, ethanol producer margins are expected to stay constant, but lower than a year ago. Stability in the ethanol market is likely to be derived from increased gasoline consumption resulting from an improved U.S. economy and lower petroleum prices at the pump.
There was a slight increase this past week in ethanol stocks from the prior-week’s level of 20.6 million barrels to the current level of 21 million barrels. Such increases do need to stop because total U.S. stocks are well above a year ago, however stocks can contract if consumption increases and production does not. Please note that recent production did decline from the prior-week’s average rate of 978,000 barrels per day (bpd) to a slightly lower average of 948,000 bpd.
Continued stability is reflected in the less than two cent average decline in the differential between the cost of corn and the return for the co-products of ethanol and DDGS for week ending Friday, February 6, 2015:
- Illinois differential is $1.84 per bushel in comparison to $1.81 the prior week and $3.43 a year ago.
- Iowa differential is $1.50 per bushel in comparison to $1.56 the prior week and $2.60 a year ago.
- Nebraska differential is $1.41 per bushel in comparison to $1.43 the prior week and $2.60 a year ago.
- South Dakota differential is $1.66 per bushel in comparison to $1.68 the prior week and $2.75 a year ago.
Country News
Argentina: Informa has raised its 2014/15 Argentina corn production estimate to 23 MMT, Reports Reuters. This is up from a January 6 estimate of 22 MMT.
Brazil: Informa has announced its corn production estimate latest in 2014/15 of 72.8 MMT, which is up 550,000 MT from a January 6 estimate, reports Reuters.
Russia: The Agricultural Ministry announced that Russia may export 20-30 MMT of grain in 2015/16, according to Reuters.
South Africa: A lack of rain in Free State province (which produces 43 percent of South Africa’s corn) could negatively impact corn yields, reports Bloomberg News. Yellow corn for July delivery now stands at $186.53/MT.