Soybeans, barge market affect prices

July 8, 2009

BY Sean Broderick, CHS Inc.

June 19—Distillers grains prices continue to be volatile. After spiking up almost $25 per ton—and even more in the barge market—at the end of May/early June, prices have come back down.

Several factors have been influencing the prices and volatility of distillers grains. A tight barge market in May left many buyers scrambling for product in the Gulf of Mexico as boats were scheduled to arrive. The acute spot shortage of product also pulled up the deferred markets, which drove the California and Southwest markets higher. Once the barge issues were alleviated, that market dropped and the destination markets followed suit.

Worldwide, the soymeal market is tight. Buyers have been seeking protein replacements, and DDGS works well as a protein replacer. The Gulf is expected to continue to lead prices, since overseas demand is more elastic than the domestic market. The price of soymeal and the value of the U.S. dollar will influence distillers prices as the summer progresses.

Ethanol plants that budget DDGS as a percentage of corn are ecstatic, as they are getting up to 100 percent the value of corn, compared to summer numbers last year that were as low as 65 percent. But with several new plants starting up and profit margins ensuring that everyone operates at capacity, that percentage could be in jeopardy.
As always, CBOT dictates the DDGS market's direction. But for now, the foreign exchange markets are influencing things as well.

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