DDGS demand strong, value relative to corn stays high

DDGS Report
By Sean Broderick | April 01, 2013

Feb. 25—February was a high-volume trading month for DDGS, as ethanol plants had pretty good windows of margin lockups. With corn futures dropping, and distillers grains prices steady, the percentage of corn value that DDGS achieved stayed at the very upper edge of the historical range. Demand has been very strong domestically, particularly in the southeast markets that are having difficulty sourcing enough corn. Cattle demand has been very robust, particularly in the southern plains. Most of the meat producers are at least at break-even, if not better, margins. Asian demand has also been very strong, manifested as high prices for Chicago containers. DDGS barge demand in the U.S. Gulf has languished since November, but is now picking up. The opening of the river in March will create additional nearby demand, especially since river levels are not as alarming as they were in December and January.

Ethanol plants are seeing opportunities in the October and November markets. There is more deferred DDGS traded for fall than in the past couple of years, trading at levels higher than 100 percent the value of corn. It seems those trades are only limited by the amount of corn the plant can lock up.

Looking ahead, corn volatility will affect prices for April forward. A lot of the tonnage produced in March was traded well before.