With March Madness upon us, and spring hopefully not too far past that, a look back at the last month can be summarized with one word: Logistics. Railroads encountered a myriad of shipment problems due to cold, snow and overcapacity. This has been an ongoing issue west of the Mississippi but the weather really had a severe impact on the Chicago gateway and the rail lines leading to the East Coast. A lot of the ethanol had been heading east from the Midwest plants and the major rail issues that had been impacting dried distillers grains with soluables (DDGS) all winter in the West were now affecting the ethanol movements to the East as well. Consequently, plant run times slowed dramatically. If onsite storage tanks are full and empty cars are not getting back to the plant in time, there&rsquo;s no choice but to slow down.
DDGS demand has been steady. The West Coast market has been primarily spot business and new container demand in Chicago has dropped off dramatically. A lot of tons had already been booked in December for the first and second quarters of 2014 and most of what is being traded now is paper trading, which is mostly for convenience of logistics. The slowdown in ethanol production, even though it was a small amount on a year over year basis, had a big impact on DDGS availability, and there was significant difficulty getting enough DDGS cars into Chicago. That tightness does look to continue into April and probably May. In spite of that, prices have been sluggish, as there is no new demand until the third and fourth quarters of 2014. More deferred time frame trade is starting to be seen, at levels around 115 to 120 percent the value of local corn.
Looking ahead, the hope of nicer weather bodes well for improved run times and rail movements, particularly in the eastern U.S. The western U.S. will still suffer though, as it is going to be tough to catch up with all of the rail demand that exists out there. There are still going to be contracted DDGS tons that will need to be fulfilled in the second quarter, but the demand and the market pricing generally weakens as the weather gets warmer. All eyes will be on planting conditions and DDGS as a percentage of corn will be influenced by what happens in the next two months. Another factor is what China decides about whether or not to take U.S. corn.
&nbsp;&nbsp;DDGS prices ($/ton)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; May&nbsp; 2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;April&nbsp;&nbsp;&nbsp; 2014&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; May 2013 &nbsp;&nbsp;
MN &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 240 &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 180 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;235
Chicago &nbsp; &nbsp; &nbsp; &nbsp;260 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 225 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;270
Buffalo &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 260 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 220 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;258
CA &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 330 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 280&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 305
FL &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;292 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; 262 &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;296
A version of this commodities report will appear in the June issue of Ethanol Producer Magazine.&nbsp;
&nbsp;

2014/03/DDGS-pile_13959357289285_largethumb.jpg

2014/03/DDGS-pile_13959357289285_thumb.jpg

2014/03/DDGS-pile_13959357289285.jpg

A look back at the last month of DDGS supply and demand can be summarized with one word: Logistics. Railroads encountered a myriad of shipment problems causing issues to the east and west.

Commodities: Logistics problems, demand equal tight DDGS supply

Related Stories

Brazil study demonstrates technical feasibility of move to E30 gasoline

EIA: Ethanol production up 4%, stocks down 3%, exports down 31%

Feenstra introduces bill to promote E85 FFVs for federal fleet

UNCIA: Brazilian corn ethanol production continues to grow in late February

USDA increases FY 2025 export outlook for ethanol volumes

Upcoming Events

North American SAF Conference & Expo

Commodities: Logistics problems, demand equal tight DDGS supply .css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}