DDGS feeling the pinch of logistics

February 9, 2010

BY Sean Broderick

Jan. 15—West of the Mississippi, car availability is directly determining monthly netback averages at ethanol plants, commanding a $20 plus premium above local truck markets. In mid-January, some plants were just loading cars expected three weeks earlier, keeping the delivered rail market tighter than expected given the January drop in corn. Trucks prices were feeling the effects of the rail shortage, cheaper corn and a local market near saturation. The Chicago container market for exports was a focal point for trucks, netting back $10 more than most local markets.

While the barge market is trading down as more trucks find their way to the river, West Coast Asian bulk demand is increasing due to distillers grains' good value in international markets. West Coast delivered prices are about $10 per ton cheaper than barges in New Orleans, but the vessel freight spread is still about $40/ton cheaper out of the Seattle/Tacoma area compared to the Gulf. Three bulk ships for February/March traded in the past two weeks.

Domestically, DDG prices have not given up as much as corn has, but are much lower as a percentage of corn than normal for this time of year. Profitability is improving in all animal feeding sectors, a positive for feed demand. Feed yard demand for DDGS may be affected by plentiful feed wheat from SW Kansas. The South American crop looks big, and likely will affect CBOT prices as it progresses. Toxin issues have been quiet and we are hopeful the challenges are being managed properly to avoid any impact on exports.

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