DDGS supply will follow corn price

DDGS Report
By Sean Broderick | July 11, 2013

July 1—Heading into the Fourth of July, DDGS prices have remained pretty steady for the past month. Sales into the Chicago container market destined mostly for China continue to drive the price. Product is being delivered into that market from as far away as western Iowa, keeping local markets propped up. Just recently though, deferred prices have started to break—partly because some of the strength was overdone and partly because some Chinese bulk DDGS business was done, which will fill some of the pipelines.

Technically, the cutoff date for the Chinese Ministry of Agriculture DDGS registration requirement was June 30, but expectations are for an extension. As of late June, only five producing plants were registered, which is not nearly enough tonnage to satisfy the Chinese demand.

The inability to source corn at numbers  that make economic sense are still keeping ethanol plants from selling DDGS for August and September. Buyers do not have much booked for that time either and proteins are very expensive for them. They will want and need to buy DDGS when offers become available, but can’t yet pay prices that create a positive margin for an ethanol plant’s crush. 

Ethanol plants will be watching to see what happens to corn prices and availability for the rest of old crop to determine their “run/don’t run” status and DDGS supply will follow that.