DDGS value relative to corn drops closer to 100%

Jan. 20—The threat mentioned earlier regarding the Chinese AQSIQ (the General Administration of Quality Supervision, Inspection and Quarantine) came to fruition in January, with reports of several thousand tons of U.S. DDGS imports quarantined. Although small as a percentage (over 1 million tons were exported to China in November), it nonetheless gave exporters pause about continuing fall’s torrid pace. The hesitation dropped the market significantly—almost 30 percent some places—and although the market rebounded, the nervousness remains. Clearly, not everyone is spooked, as there have been purchases for second-quarter delivery to China.

Domestic feeders are not complaining about the export glitch. After seeing delivered prices run up to 140 percent of the value of delivered corn, the drop in exports forced more product into domestic markets, bringing prices closer to 100 percent. The delivered rail markets are still suffering from poor performance due to congestion and weather-related issues, so their values did not drop as quickly. These issues benefit local feeders, since that is where plants turn when rail turnarounds are slow and container trucks are not showing up.

It appears as though the days of 140 percent the value of corn for DDGS are behind us, at least near-term. With the Chinese New Year upon us, it is not clear how quickly we will get a resolution on China’s intentions. Whatever happens will impact 2014.