DTN Weekly Distillers Grains Update

A steady rise in prices of dried distillers grains has been driven primarily by a sustained sharp rise in the cost of both corn and soybean meal.

Prices of DDG have risen as much as $50 per ton since mid-April. According to DTN's price information, the DTN weekly spot price average has increased from $116 per ton in mid-April to $164 per ton this week.

The price increases in competing commodities have been buoyed by a number of factors, said Joel Karlin, contributing DTN market analyst and commodity manager for Western Milling in Goshen, California, including late-season production losses of both corn and soybeans in Brazil and Argentina that will enhance U.S. exports sales for the remainder of this marketing year and the 2016-17 marketing year, which starts Sept. 1.

"Certain macro factors have also been supportive such as the fall in the foreign exchange value of the dollar, the ongoing rally in crude above $50 per barrel and the specter of continued easy money from the world's central banks," Karlin said. "The final boost is linked to forecasts for some hot and dry weather next week and, even though it is very premature to get this kind of market response, the trade sees this as a sign of things to come later this summer with a forming La Nina."

Domestic demand for DDG had been good as DDG price gains lagged advances seen in corn and the protein meals. Some ration reformulations took place to up DDG inclusion rates and reduce soybean and canola meal intakes. Karlin said this was particularly true of the swine and poultry industries where protein meal usage rates are very high. Recently, some of cattle feeders reduced DDG intakes as prices started to approach and exceed 100% of the value of corn.

Export demand has also been robust, with foreign buyers seeing the relative value of DDG versus a corn/soybean meal combination. Karlin added that rumors of China announcing the DDG anti-dumping investigation results soon have caused a near-term surge in demand.

"Chinese importers are benefiting from great margins on DDGS with the recent protein run-up in domestic soybean meal values," he said.

Supplies of DDG are holding out quite well currently, Karlin said. The surge in ethanol values (at their highest levels since December 2014) and the escalation of DDG prices are making ethanol margins profitable, even with the increase in corn prices. He added that scheduled maintenance shutdowns at some plants have not been overly disruptive to supplies, at least on the West Coast.

In the coming weeks, Karlin said he believes prices may post modest increases, at least through the end of the month.

"All the feed ingredient markets are in a full-blown bull market that may not be entirely justified by the fundamentals. But here, as in the past, the trend is your friend," Karlin said. "It is difficult to see anything more than a modest setback until the end of the month when the USDA will release an updated acreage report on June 30 and the trade has a chance to see the weather forecast heading into the critical Fourth of July weekend."

Karlin said he would not recommend end users "buy into the teeth of the rally."

"If corn and soybean meal do move higher, it will drag DDG along with it," he said. "Still, an 80-cent rally in corn and a an even more stunning $160 per ton surge in soybean meal since the beginning of April seems extremely overdone at this stage of the growing season and in light of global feed grain and oilseed supplies that still remain more than comfortable."

Karlin added that DDG buyers should be careful to watch prices and look for good opportunities for feed ingredients.

"An extended period of steady to lower trending prices along with the deflationary environment we have been in for the past four years led to a sense of complacency that was snapped by the huge money flow surge in both commodities and equities," he said. "This should remind end users to be vigilant with regard to monitoring market conditions and seeking opportunities to lock in feed ingredient prices when profitable margins can be had."

Cheryl Anderson can be reached at Cheryl.anderson@dtn.com

Follow Cheryl Anderson on Twitter @CherylADTN

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NEWS IN BRIEF

China Rumored to Purchase DDG to Blend with Low Quality Corn Stocks

Reports have surfaced lately that China will sell approximately 78 million bushels of its surplus corn reserves, much of it believed to be of substandard quality.

According to an article in Mason City, Iowa's Globe Gazette (http://bit.ly/…), much of China's corn reserves would be considered sample grade in the U.S. -- the worst possible quality. These inferior quality corn stocks were rumored to be behind some of the antics China has pulled in recent years with the U.S. ethanol industry, such as refusing shipments based on the MIR 162 biotech trait and now its second distillers grains anti-dumping investigation against the U.S.

There are also reports that China has purchased as much as eight shiploads of U.S. sorghum and distillers grain, possibly to blend with its glut of poor quality corn to then use as livestock feed.

DTN market analyst Todd Hultman said that much of this year's concern about China's corn supplies and the move to release more corn from reserves has been a "bearish horror story that has lacked any real consequence for U.S. prices." While these changes signal an important shift for China domestically, China has not been a significant importer or exporter of corn in recent years, Hultman said.

So far in 2015-16, China imported about 7 million bushels of U.S. corn. The lowering of China's domestic prices is likely to make them a larger corn importer in the next few years.

"As far as estimating the size or quality of China's corn reserves, there is no way to make a credible guess and we are better served paying attention to the market's own clues," Hultman said. "Corn prices have been rising since April, largely because dry weather has reduced corn supplies in Brazil and made the U.S. the place to buy corn -- a bullish advantage that is likely to continue through this summer and help offset the bearish possibility of another large U.S. harvest."

He added that Dow Jones reported early Wednesday that China's soybean imports were up 14% in the first five months of 2016, another clue that they still need sources of protein and distillers grains will likely continue to be part of that mix.

Cheryl Anderson can be reached at Cheryl.anderson@dtn.com.

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DTN WEEKLY DDG SPOT PRICES

CURRENT	PREVIOUS
COMPANY	STATE	6/10/2016	6/3/2016	CHANGE
Bartlett and Company, Kansas City, MO (816-753-6300)
	Missouri	Dry	$160	$160	$0
		Modified	$75	$75	$0
CHS, Minneapolis, MN (800-769-1066)
	Illinois	Dry	$175	$165	$10
	Indiana	Dry	$175	$165	$10
	Iowa	Dry	$175	$160	$15
	Michigan	Dry	$175	$160	$15
	Minnesota	Dry	$160	$140	$20
	North Dakota	Dry	$160	$150	$10
	New York	Dry	$170	$165	$5
	South Dakota	Dry	$150	$140	$10
MGP Ingredients, Atchison, KS (800-255-0302 Ext. 5253)
	Kansas	Dry	$160	$145	$15
POET Nutrition, Sioux Falls, SD (888-327-8799)
	Indiana	Dry	$180	$155	$25
	Iowa	Dry	$165	$150	$15
	Michigan	Dry	$145	$145	$0
	Minnesota	Dry	$155	$150	$5
	Missouri	Dry	$170	$160	$10
	Ohio	Dry	$180	$160	$20
	South Dakota	Dry	$155	$150	$5
United BioEnergy, Wichita, KS (316-616-3521)
	Kansas	Dry	$135	$135	$0
		Wet	$40	$40	$0
	Illinois	Dry	$180	$160	$20
	Nebraska	Dry	$135	$135	$0
		Wet	$40	$40	$0
U.S. Commodities, Minneapolis, MN (888-293-1640)
	Illinois	Dry	$170	$165	$5
	Indiana	Dry	$175	$160	$15
	Iowa	Dry	$165	$155	$10
	Michigan	Dry	$170	$165	$5
	Minnesota	Dry	$160	$150	$10
	Nebraska	Dry	$155	$145	$10
	New York	Dry	$170	$165	$5
	North Dakota	Dry	$155	$145	$10
	Ohio	Dry	$180	$165	$15
	South Dakota	Dry	$150	$140	$10
	Wisconsin	Dry	$170	$150	$20
Valero Energy Corp., San Antonio, TX (402-727-5300)
	Indiana	Dry	$170	$155	$15
	Iowa	Dry	$160	$150	$10
	Minnesota	Dry	$155	$145	$10
	Nebraska	Dry	$170	$150	$20
	Ohio	Dry	$180	$165	$15
	South Dakota	Dry	$155	$140	$15
Western Milling, Goshen, California (559-302-1074)
	California	Dry	$230	$220	$10
*Prices listed per ton.
	Weekly Average		$164	$152	$12
The weekly average prices above reflect only those companies DTN
collects spot prices from. States include: Missouri, Iowa, Nebraska,
Kansas, Illinois, Minnesota, North Dakota, South Dakota, Michigan,
Wisconsin and Indiana. Prices for Pennsylvania, New York and
California are not included in the averages.

*The spot prices gathered by DTN are only intended to reflect general market trends and may vary. Please contact individual plant or merchandiser for exact prices.

If you would be willing to take a weekly phone call and have your distiller grains spot prices listed in this feature, please contact Cheryl Anderson at (308) 224-1527 or (800) 369-7875, or e-mail cheryl.anderson@dtn.com.

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VALUE OF DDG VS. CORN & SOYBEAN MEAL
Settlement Price:	Quote Date	Bushel	Short Ton
Corn	6/9/2016	$4.2650	$152.32
Soybean Meal	6/9/2016		$413.50
DDG Weekly Average Spot Price			$164.00
DDG Value Relative to:		6/10	6/3	5/27
Corn		107.67%	102.49%	103.11%
Soybean Meal		39.66%	36.34%	37.76%
Cost Per Unit of Protein:
DDG		$6.56	$6.08	$6.08
Soybean Meal		$8.71	$8.81	$8.48
Notes:
Corn and soybean prices taken from DTN Market Quotes. DDG
price represents the average spot price from Midwest
companies collected on Thursday afternoons. Soybean meal
cost per unit of protein is cost per ton divided by 47.5.
DDG cost per unit of protein is cost per ton divided by 25.

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USDA MARKET NEWS/DISTILLER GRAINS PRICES

USDA WEEKLY DISTILLERS GRAINS SUMMARY (June 3, 2016)

	Dried	Modified	Wet
FOB PLANT PRICES PER TON
Iowa	139.00-165.00	54.00-75.00	35.00-44.00
Minnesota	145.00-160.00	60.00	36.00-55.00
Nebraska	132.00-156.00	58.00-83.00	40.00-55.00
South Dakota	140.00-155.00	65.00-76.00	35.00-36.00
Wisconsin	144.00-160.00	67.00-80.00	NQ
Eastern Corn Belt	140.00-170.00	65.00-80.00	NQ
Kansas	135.00-170.00	NQ	45.00-54.00
Northern Missouri	150.00-164.00	75.00	44.00-45.00
DELIVERED PRICES PER TON
CIF NOLA	182.00-197.00
Pacific Northwest	205.00-210.00
California	205.00-215.00
Texas Border (metric ton)	220.00-240.00
Lethbridge AB	190.00
Chicago	170.00-185.00

Dried Distillers Grain: 10% Moisture

Modified Wet Distillers: 50-55% Moisture

Wet Distillers Grains: 65-70% Moisture

CALIFORNIA WHOLESALE FEEDSTUFF PRICES (Tue June 7, 2016)

Distillers Dry Grains

  Rail to California Points          210.00-224.00    unch-up 7.00

  FOB Truck to California Points     210.00-225.00    unch-up 5.00

PACIFIC NORTHWEST WEEKLY FEEDSTUFFS (Tue June 7, 2016)

Offers for Distillers Dried Grains delivered by rail to feed mills in the Pacific Northwest were steady to 3.00 higher from 217.00-225.00. Offers for distillers dried grains trans-loaded onto trucks and delivered to Willamette Valley dairies were also steady to 3.00 higher from 235.00-240.00.

*All prices quoted per ton unless otherwise noted.

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NASS/USDA MONTHLY CO-PRODUCTS PRODUCTION

Dry and Wet Mill, Co-products and Products Produced - United States

March 2016 - April 2016

June 1, 2016

Highlights:

Dry mill co-product production of distillers dried grains with solubles (DDGS) was 1.70 million tons during April 2016, down 11 percent from March 2016 but up 2 percent from April 2015. Distillers wet grains (DWG) 65 percent or more moisture was 1.26 million tons in April 2016, down 4 percent from March 2016 and down 5 percent from April 2015.

Wet mill corn gluten feed production was 306 thousand tons during April 2016, down 11 percent from March 2016 and down 2 percent from April 2015. Wet corn gluten feed 40 to 60 percent moisture was 301 thousand tons in April 2016, up 4 percent from March 2016 but down 4 percent from April 2015.

Co-products and Products	Apr 2015	Mar 2016	Apr 2016
Dry Mill		tons
Condensed distillers solubles (CDS-syrup)	140,171	137,396	130,324
Corn oil	101,614	125,510	110,439
Distillers dried grains (DDG)	411,664	384,739	374,750
Distillers dried grains with solubles (DDGS)	1,663,380	1,919,507	1,701,500
Modified distillers wet grains (DWG) <65% moisture	1,327,808	1,320,322	1,264,745
Modified distillers wet grains (DWG) 40-64% moisture	387,155	456,256	426,558
Wet Mill
Corn germ meal	61,922	68,140	67,530
Corn gluten feed	313,889	342,668	306,464
Corn gluten meal	89,356	91,945	84,916
Corn oil	42,998	51,415	51,455
Wet corn gluten feed 40-60% moisture	314,047	290,565	301,283

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DDG LINKS/RESOURCES

National Organizations:

Distillers Grains Technology Council (www.distillersgrains.org)

Renewable Fuels Association (www.ethanolrfa.org)

U.S. Grains Council (www.grains.org)

National Corn Growers Association (www.ngfa.org)

American Feed Industry Association (www.afia.org)

Government/Regulatory:

National Grains and Feed Association (www.ngfa.org)

Association of American Feed Control Officials (www.aafco.org)

USDA Animal Feed Safety System (http://1.usa.gov/…)

USDA Food Safety Modernization Act (http://1.usa.gov/…)

University Websites:

Corn Processing Coproducts Manual, Nebraska Corn Board and Nebraska Corn Board and the University of Nebraska-Lincoln Institute of Agriculture and Natural Resources Agricultural Research Division Cooperative Extension Division (http://bit.ly/…)

University of Minnesota Biofuels Coproducts in Animal Feed (www.biofuelscoproducts.umn.edu)

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DDG CONFERENCES

*Distillers Grains Technology Council Inc.'s 21th Annual Distillers Grains Symposium

The Distillers Grains Technology Council will hold its 21st Annual Distillers Grains Symposium on May 17-18, 2017 at the downtown Marriott in Indianapolis, IN. For information, contact the DGTC office at (515) 294-4019 or (800) 759-3448, or check the DGTC website (http://www.distillersgrains.org).

(If you are sponsoring or know of any event, conference or workshop on distillers grains, and would like to list it in the DTN Weekly Distillers Grains Update, please contact Cheryl Anderson (see contact info below).

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We welcome any comments/suggestions for this feature. Please let us know what information is valuable to you that we could include in the Distillers Grains Weekly Update. Please feel free to contact Cheryl Anderson at (402) 364-2183, or e-mail cheryl.anderson@dtn.com.

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