DDGS Comments: Domestic DDGS buyers experienced rate increases of $7-10/MT for the April to June time period. As well, there were sizable rate increases for barges and bulk rail rates to the Gulf of Mexico. Such increases are in part due to higher logistical costs. Containerized DDGS are anticipated to soon see similar cost increases because shipping lines have apparently given notice to clients of their intention to implement a general rate increase (GRI) after the first of April. That GRI is expected to increase costs for a 40-foot container of DDGS to Asia by at least $6/MT.
Knowledge of this impending GRI seems to be one reason for increased buyer interest. At the moment, business activity remains limited because the spread between offers and bids is commonly more than $10/MT. Vietnamese buyers were actively making price inquiries, but no trades were reported. Chinese buyers were also making a lot of inquiries, and 20,000 MT of DDGS were sold for Shanghai and Qingdao at around $295-297/MT.
DDGS merchandisers seem anxious and ready to work with buyers in seeking pricing opportunities for this spring because they recognize that volatility in corn futures contracts has a tendency to increase after the first of March. This increase is due to uncertainties about acreage and planting conditions; merchandisers also recognize that ethanol plants will be slowing down production for spring maintenance. Under such conditions, it is much easier for both the merchandisers and the established clientele if production obligations are known beforehand.
Ethanol Comments: Ethanol stocks are slowly in decline: Total stocks were 21.5 million barrels for the week ending February 27. That is slightly lower than the prior week’s level of 21.6 million barrels, but admittedly a concerning 29.6 percent larger than the prior year’s level of 16.6 million barrels.
Total ethanol stocks are not anticipated to increase significantly more this spring if weekly production stays on course with its present decline from 947,000 barrels per day (bpd) down to 931,000 bpd for the most current week. That is still more than 4.1 percent above the year-ago production rate of 894,000 bpd, but lower gasoline prices should stimulate greater gasoline consumption this spring and into the summer driving season.
The differential between the cost of corn and the return for the co-products of ethanol and DDGS improved across the Corn Belt for week ending Friday, March 6, 2015:
Illinois differential is $1.97 per bushel, in comparison to $1.78 the prior week and $6.08 a year ago.
Iowa differential is $1.55 per bushel, in comparison to $1.41 the prior week and $3.74 a year ago.
Nebraska differential is $1.41 per bushel, in comparison to $1.28 the prior week and $3.47 a year ago.
South Dakota differential is $1.72 per bushel, in comparison to $1.67 the prior week and $3.93 a year ago.
Country News
Argentina: Argentine farmers are suspending grain sales for three days this week in order to protest government policies (including export quotas) that hurt their profits, reports Reuters. The strike will begin on Wednesday, March 11.
Cuba: An important U.S. agricultural delegation began three days of meetings on Monday in an effort to forge business contacts, according to Reuters. The 95-person delegation was composed of two former agriculture secretaries, numerous state agricultural officials and members from state farm bureaus. Cuba imports around $2 billion in agricultural products annually, and this mission is seeking to have U.S. exports make up $1 billion of that total. Exports in 2014 totaled $291 million, which was down from 2008’s high of $710 million.
Ukraine: Food and Agriculture Minister Oleksiy Pavlenko has announced that Ukraine will send a delegation to China next month in an effort to negotiate a new agreement that would double corn exports, reports Reuters. Exports to China in 2014 totaled nearly 1 MMT. Ukraine is expected to be the world’s fourth-largest corn producer in 2014/15, with total exports of 16 MMT (down from 19.9 MMT last year). The minister also indicated that he is seeking to increase trade with the EU to make up for sales traditionally destined for Russia.