Commodities: DDGS value comes down to logistics

October 1, 2014

BY Sean Broderick, CHS

August’s news continued to depress prices in September. Chinese MIR 162 (Syngenta trait corn) issues are still not resolved, leaving significant amounts of contracted tonnage that needs to move a different direction.  River logistics are still an issue with barge rates that are astronomical due to harvest demand. And rail movements are still difficult, which is backing up DDGS at the origins, but still keeping delivered prices firm. There are only a finite number of railcars to go around and those that are railroad-supplied have a significant additional premium for them. Local truck logistics are going to difficult as well, as drivers move from hauling DDGS to moving harvest grains.

Still, we’ve seen increased usage in domestic hog and poultry diets. DDGS was especially valuable when soymeal was expensive during August and September and feeders used more of it. Soymeal has dropped significantly in September, causing re-evaluation of the spread between the two. But we’ve have also seen increased demand in Mexico, a result of the combination of expensive soymeal and the premiums for corn cars.  Just to procure railroad cars for corn unit trains costs more than $5000 per car, above and beyond the freight, which has helped to keep DDGS competitive versus corn in delivered markets.

Looking ahead, we are still going to need to use a lot more DDGS domestically. Margins are still positive for ethanol plants, so there won’t be a decrease in supply any time soon. With railroad and barge logistics being what they are, truck sales are going to have to stay competitive enough to keep plants empty. Obviously, the grain crop is big, but lately, DDGS value all comes down to logistics.

 

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DDGS prices

Nov  2014         Oct  2014          Nov  2013

MN                100                     120                  215

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Chicago      105                     130                  242

Buffalo         120                       115                  208

CA                169                      167                   268

Florida          143                155                 267

 

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