Market analyst: Corn prices back up, DDGS prices likely to follow

Corn prices have rallied from a holiday slump and distillers grains prices should soon follow, according to Darin Newsom, senior analyst for Telvent DTN.

Following a seasonal pattern, corn hit a low of $5.66 in mid-December, according to national average cash prices on the DTN national corn index. As of Dec. 29 the average corn cash price was $6.19, a rally of more than 50 cents. “It certainly looks like it’s on its way to moving back into its seasonal uptrend,” Newsom told EPM.

Distillers grains prices have held at about $187 per ton for the last several weeks after hitting a high of $219 per ton in mid-November, according to a weekly spot average price complied by DTN. Although distillers grains generally follow the ups and downs of the corn market there is a bit of a lag in the reaction, he said. Still, DDGS continues to follow corn prices relatively well. “I think we’ll probably see next week, as this works through the system, the DDG market will start to rally,” he said.

Looking at the seasonal patterns of DDGS over the past five years, prices tended to hit a low in mid-August and then increase through June. The November through December timeframe, however, DDGS prices tended to stabilize. This year, however, DDGS prices actually dropped during that time. “So maybe that’s all we really saw this year, the normal stability,” Newsom said. “Yet because we saw such large investment liquidation in commodities, instead of just stabilizing as it normally does, it moved lower.”

For the most part, weak prices can be attributed to investment traders pushing the market down as well as the fact that merchandisers weren’t stepping in to buy. Newsom also sees some changing ideas on long term fundamentals. “So we did see more pressure than normal in the corn market and DDGs and other related markets,” he said.

Now, the question is will buying resume in late winter and early spring and will that mean higher prices for corn, DDGS, soybean meal, ethanol and other commodities? “Or is this just an end of the year bounce? I think we are going to have to see how that plays out,” he says, “But it certainly looks like, if nothing else, we have at least put a short term low into this round of selling for now. We’ve got to get through January and February before these markets really get heated up again, but I think for now we may have put in the low.”

The next big thing to watch for is the USDA annual report coming out in mid-January. The report will contain key information to understanding the corn and DDGS market, such as numbers for quarterly stocks, the final production numbers from last year’s crop and more. “DDG traders or those in the DDG market will need to keep a very close eye on that,” he said. “That is going to heavily influence the price of DDGs over the next couple weeks.”