DDGS Comments: Buyers have been observing some differences in price action this past week between the Chicago corn futures contracts and cash DDGS prices. For example, nearby corn futures contracts tested price support and attempted to break through to lower levels. However, the selling of corn futures by speculators has been increasingly met by global end-users who seem to perceive favorable prices that extend out into the future. Growing interest in such activity is one reason that DDGS prices were steady to firmer this past week.
Both domestic and containerized rates averaged unchanged to only $1/MT higher, but the rate for bulk DDGS was up about $7/MT at the Gulf of Mexico. Another attractive feature of the containerized rates is that they decline on average by approximately $7/MT from May to July.The rate for bulk DDGS to the Gulf of Mexico similarly decline by about $6/MT over that same time period, and even the domestic rates decline by about $4/MT.This condition seems to be incentivizing DDGS buyers to extend some coverage into the future. One merchandiser noted that he sold over 18,000 MT this past week with prices as follows:
- Qingdao: $268 June-July;
- Busan: $264 June-August;
- Lat Krabang: $272; and,
- Haiphong: $282.
A number of Chinese buyers would like to see if still lower DDGS prices can be obtained, as there is some uncertainty regarding the stability of Chinese demand and import policies by their own government.The result is that a number of buyers from China and other destinations such as Vietnam are patiently waiting – but they all seem to appreciate DDGS merchandisers keeping them informed of developing market conditions.
Ethanol Comments: Ethanol stocks remained unchanged from the prior week at 20.8 million barrels, but that condition may soon change because of the decline in seasonal downtime for maintenance. Production for the week ending May 1 fell to an average daily rate of 887,000 barrels per day (bpd), well below the prior week’s average rate of 921,000 bpd and even below the year-ago level of 894,000 bpd. In the meantime, the differential between the price of corn and the spot price of corn and co-products improved slightly across the Corn Belt during week ending May 8, 2015:
- Illinois differential is $2.59 per bushel in comparison to $2.52 the prior week and $3.19 a year ago.
- Iowa differential is $2.30 per bushel in comparison to $2.23 the prior week and $3.01 a year ago.
- Nebraska differential is $2.18 per bushel in comparison to $2.11 the prior week and $2.83 a year ago.
- South Dakota differential is $2.53 per bushel in comparison to $2.49 the prior week and $3.47 a year ago.
Country News
China: Falling global corn prices could incentivize an increase of corn imports into China as the prices of domestic corn remain high, reports Reuters. The disparity between international and domestic prices stands at $16/MT. China currently permits 7.2 MMT of annual corn imports at a 1 percent tariff, which is almost universally purchased by large state-owned concerns, which forces the private sector to buy their corn from more expensive domestic sources. China’s state corn reserves are currently holding a record 150 MMT, which is equivalent to eight months’ consumption.
Ukraine: Agriculture Minister Oleksiy Pavlenko announced that Ukraine is unlikely to export more than 32 MMT of grain in 2014/15, which is down from an earlier forecast of 37 MMT, reports Reuters. For comparison, Ukraine exported 32.8 MMT in the 2013/14 season. The 2014 grain harvest was a record 63.8 MMT and as of April 30, had exported 29.3 MMT (2.6 MMT in April), which included 1.95 MMT of corn. Pavlenko indicated in his comments that high volumes of corn could be exported over the next couple of months.
Zimbabwe: The government is distributing grain from its stockpiles and has announced plans to import $700 million worth of grain for human and livestock consumption following a drought that has badly damaged this year’s crop, according to Bloomberg News. Zimbabwe consumes around 1.7 MMT of corn annually and will likely need to import 700,000 MT before the harvest in March 2016. Agriculture Minister Joseph Made announced that the government intends to work with private millers for grain purchases and is not immediately seeking food aid from the international community. The corn harvest for the entire region of southern Africa is estimated by the FAO to be 26 percent lower than it was in 2014.