DDGS prices under high export demand, price appreciation

The export market for distillers grains continues to drive prices while also impacting demand domestically. Animal producers are dropping their usage rates or searching for a feed replacement, thanks to higher prices.
By Sean Broderick | November 25, 2013

Oct. 25—With Halloween right around the corner, the dynamics of the export DDGS market are still driving prices, but export logistics are the real story. Truck bids delivered to the container yards are well above the rail bids, but (additional) trucks have been extremely difficult to find. Barge bids are elevated in the nearby as sales that were made earlier based on the implied size of the corn crop are now coming to bear, but the corn harvest is not yet pressuring DDGS prices. 

All of the export demand and the price appreciation hurts domestic DDGS demand. Hog producers who were using DDGS at a 40 percent inclusion rate are dropping their usage down to 10 percent. Cattle producers, who comprise a much larger part for the overall market, are actively looking for a replacement, which might be difficult for the next couple of weeks, but possible on a longer term than that. Since cattle feeding is 60 to 80 percent of the 28 to 30 million tons in the domestic market, even a medium-sized drop in usage will ripple through pricing and the export market is not enough to offset that.

Going ahead, it looks as though export strength will continue for a while. Sales are being made now out through the third quarter. Watching to see how the domestic market reacts is what will drive things.