Vomitoxin scare impacts rail market

By Sean Broderick | January 04, 2010
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Dec. 22The recent theme of the DDGS market has been logistics. The vomitoxin scare caused many hog producers to lower distillers grains inclusion rates, which pushed more product into the rail market. This increased demand for railcars, depressed local truck markets and tightened up rail markets. Prices have not changed much in the West, but a trade was just made for four unit trains to be sent to Asia for mid-February, which is going to drastically decrease the supply of unit trains.

Ironically, the cheaper local truck prices may incent hog producers to figure out a way to increase their distillers grain inclusion rates via "toxin binders" or ration changes.

Export markets are in the spot time frame, with few buyers looking out further than a month at a time. The near-bys have been tight, and deferreds have been a big discount. Containers have been very strong lately, but they usually drop off after Christmas, so expect January demand to drop in comparison with December. Mexico demand is steady, but that market must pay premiums to offset the added transit time for railcars. Europe approved the last variety of corn that was holding up U.S. DDG importation, so that should eventually come into play on the demand side.

Future focus is on the CBOT and the weather in South America. Ethanol margins will also dictate run times and corresponding DDGS production. Overseas demand could possibly improve which should help DDGS prices for the winter. EP