Corn supply will affect DDGS prices

DDGS Report
By Sean Broderick | June 26, 2013

May 31—Post Memorial Day markets have advanced, mostly because of the strength in the Chicago container market.  Most of this demand has been from China, partly because of the strength in protein prices, and the delays in shipments from South America. Some boats are waiting more than 2 months to get loaded.

Domestically, we have seen good demand for DDGS in the Eastern U.S., as that market fights the demand pull from Chicago. In the Western and Southern Plains markets, competition from other commodities is tempering demand for distillers grains, but feeders' coverage for the July forward time frame is no better than the ethanol plants’. Everyone looks at the discount in the corn futures markets going ahead and wants to pay less, but farmers still have a pretty good hold on it.  

DDGS prices going ahead will be affected both by the price of corn and ethanol plants' ability to procure it for the remainder of the summer. The margin structure past the nearby time frame (greater than a month out) has made people question whether all plants will run, but that is the way it has been for quite a while. Deferred margins have not given much opportunity for plants to commit to running more than a month or two ahead. Ethanol prices have been escalating lately and margins look like they will start to improve again through the end of the summer, leading to a commitment to forward run time. There’s hope that the increased demand from China will offset any increase in production. Overall, the growing season has had a pretty crazy start and it looks like this summer is going to be no different than the past couple of unusual ones!