Ethanol Blog

Dwindling production, tight supplies and higher corn prices worked together to cause spot prices of dried distillers grains to jump an average of $10 per ton in the past week.

The DTN weekly DDG spot price average increased for the third week in a row, rising $10 per ton, from $256 per ton last week to $266 this week. This marks the highest spot price average since the first week of November, when prices were at $264 per ton.

Of the 29 Midwestern locations DTN collects prices from, 27 locations said their prices increased from last week between $7 and $15 per ton, though most were in the $5 to $10-per-ton range. Prices at two locations remained the same since last week and no price decreases were reported.

The DDG market had been quiet and steady last week in anticipation of Friday's USDA crop production report. With ending stocks lower than expected, corn prices jumped between 15 and 20 cents by Monday. Since DDG prices tend to mirror movement on the corn board, DDG prices responded in kind. To combat high corn prices and protect dwindling profit margins, a number of ethanol plants are either planning to or have already shut down temporarily or have scaled back production. That, in turn, makes supplies of DDG tighter.

Merchandisers told DTN this week that in addition to chasing corn prices, tight supplies are pushing prices up as well. Several reported that they were sold out, especially in the nearby contracts. One merchandiser said he was sold out for January and February as well.

Availability of containers is still tight, especially in the Chicago area, as demand is still good. Demand for registered product from China is especially strong, as more U.S. suppliers finish the registration process now required to export DDG to China,

Corn prices evidently rose faster than DDG prices in the past week, as the value of DDG relative to corn actually dropped from 103.59% last week to 102.80%, still at a precariously high level. The value of DDG relative to soybean meal rose since last week, from 62.87% to 64.25%.

The cost per unit of protein last week was $10.64, compared to the cost per unit of protein for soybean meal at $8.72.

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