Market Matters Blog

OMAHA (DTN) --Most of the plants DTN contacted for DDG prices for the week ended March 26 went to no offers, while a few places did post prices. One plant that posted prices told DTN his supplies were limited. Given the very few offers out there, it is obviously hard to define this market. However, some plants that do show offers are posting truck prices as high as $50 above what their prices were just two weeks ago in some regions.

It is no secret plant margins have suffered from the coronavirus-related losses in the energy complex, and specifically, gasoline and ethanol prices. Ethanol prices have become higher than gasoline, which is a detriment to plant margins, because it has a negative effect on blending. The U.S. consumer's driving habits have changed dramatically as many states have asked residents to stay home or shelter in place and only go out for essential needs, which in turn drastically affects the use of gasoline.

On March 2, April ethanol futures were at $1.28 per gallon versus April RBOB at $1.54 per gallon, putting RBOB at a 26-cent premium to ethanol. As of March 26, the April ethanol futures were at $0.970 versus April RBOB at $0.5438, putting ethanol at a 42.6-cent premium over RBOB. Plant margins have become stressed and many plants have slowed production, with some going offline temporarily.

Wednesday's Energy Information Administration data showed domestic ethanol production dropped for a third straight week, sliding 3% to a 23-week low in the week ended March 20, while blending demand dropped to the lowest level in six weeks, and inventories were drawn down. EIA showed U.S. ethanol supply was down 458,000 barrels (bbl) from last week to 24.140 million bbl, a seven-week low and down 1.2% from the same week last year.

In turn, DDG production has also slowed and supplies have become thin. Many plants that still have product are busy filling existing sales. This has pretty much shut down the spot market, which is evident in plants where you see no offers.

In its weekly update, the U.S. Grains Council noted, that DDG is priced at 133% of cash corn values, up from last week and above the three-year average. "The DDG/cash corn ratio is at its highest level since July 2016. The DDG/soymeal price ratio is 48.00%, steady with the prior week and above the three-year average of $42.00%."

In the export market, USGC noted, "This week, barge CIF NOLA values are up $22 per metric ton (mt) for April shipment while FOB Gulf values are up $16/mt. The market for rail delivered DDGS is exceptionally strong as well, with rates to the PNW and California up $45/mt or more for April shipment. Internationally, offers for containerized DDGS to Southeast Asia are reflecting strong demand, with the average rate rising $28/mt for April positions and $35/mt for May. The average value for containers to Southeast Asia hit $311/mt this week."

Merchandisers report that DDGS exports in April will be strong and that trend may likely continue into May as well. Expectations are that prices for deferred shipments will rally later this spring following the current rise in spot values, with demand likely remaining strong amid a tight supply pipeline, added USGC.

NOTE: All prices listed below can change at any time and are subject to confirmation from seller.

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

Follow her on Twitter @MaryCKenn

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