Market Matters Blog

The DTN average dried distillers grains, or DDG, spot price was down $4 per ton from two weeks ago, at $94, for the week ended March 9. Of the 39 locations from which DTN collects spot prices, 27 bids ranged from $2 to $20 lower, two bids ranged from $5 to $8 higher and the balance of the prices were unchanged.

Prices moved lower the past week as supplies have become heavy and demand has slowed. One merchandiser told me that besides warm weather slowing feed use, pastures are greening and animals can be turned out to pasture to feed.

While the U.S. Energy Information Administration said ethanol plant production slowed for the week ending March 3, we will need to see more of a slowdown to keep supplies from becoming burdensome. The opening of the Mississippi River on March 9 as the first tow reached St. Paul, Minnesota, should be supportive to shippers and allow them to move more product than to just rely on trucks and rail cars, which have seen some weather-related logistic issues the past few months.

The value of DDG relative to corn for the week ended March 9 was lower at 73.16% and the value of DDG relative to soybean meal was lower at 29.00%. The cost per unit of protein for DDG was lower at $3.76 compared to the cost per unit of protein for soybean meal which was lower at $6.82. The low relative prices indicates that prices may be near the bottom, but without a rebound in exports, prices could continue to work lower.

CIF NOLA (New Orleans, Louisiana) dried distillers grains with solubles, or DDGS, prices for the week ended March 9 were down 8 cents to down 4 cents for March, at $115 to $124 per ton and down 1 cent to down 7 cents for April at $121 to $125. Export demand nearby has remained slow, but the January numbers were up compared to one year ago totaling 937,628 metric tons in January, up 17% from a year ago. The U.S. Census Bureau said Mexico was the top export destination in January, accounting for 19% of total exports, followed by Turkey and China. China's January purchase of 87,310 metric tons was down 60% from a year ago and Vietnam was notably absent.

A merchandiser told me that in early February, there was chatter back and forth between USDA's Animal and Plant Health Inspection Service, or APHIS, and Vietnam's Plant Protection Department about what fumigants can be accepted for use on containers, who would monitor the fumigation in the United States, what documentation would be acceptable, along with other issues about the process from start to finish. After speaking with the rest of the industry, APHIS is expected to send a final proposal to Vietnam's PPD for approval, but so far there is no word they have done so.

One of the concerns is it may be possible a forbidden insect actually enters the DDGS container from other unrelated containers while en route to Vietnam on a ship. A merchandiser told me that U.S. shippers have told Vietnam this kind of infestation is not possible in bulk ships because they are fumigated at port and then aired out while heading to Vietnam and are not exposed to insects like containers may be. Also, fumigation of an entire ship full of DDGS is more reliable than container fumigation.

Shippers hoped this would change the PPD's mind and at least allow bulk U.S. DDGS to start shipping, but that has not yet happened. Regardless, no matter what happens between APHIS and the PPD, a merchandiser told me that none of this may be settled until summer or later.

Meanwhile, Vietnam has been buying DDGS from Canada and other countries, ignoring the U.S. that used to be their No. 1 source. On top of that, DDGS prices in Vietnam are close to $100 per ton higher than U.S. prices. That in itself makes no sense, but nothing is changing in the near future to fix it.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(ES/BAS/TN)

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