By Cheryl Anderson
DTN Staff Reporter
DAVENPORT, Neb. -- Prices of dried distillers grains have continued to rise in recent weeks, especially for delivered prices. However, Midwest truck prices are not as strong as delivered prices.
Sean Broderick, senior merchandiser for CHS in Minneapolis, told DTN that the higher delivered prices are partially due to a shortage of railcars, especially in California and the Pacific Northwest.
"Demand is strong on the coast," Broderick said, "but cars are moving slower so people are not able to sell or receive as much." Protein is also more expensive, and DDGS prices are being affected by that as well.
In the Midwest, prices may remain more on the steady side. Although prices may seem high, they are probably not unreasonably so.
"We're on the expensive side as a historical percentage of corn, but cash corn is hard to come by," he said. "But we're probably fairly priced for the truck market in the Midwest."
The DTN weekly DDG spot price average has been rising every week since early November, climbing a total of $13 per ton in the past four weeks. The average rose from $205 per ton the first week of November to this week's average of $218 per ton.
Although supplies of DDG continue to be tight due to ethanol plants being oversold, Broderick said that tightness may continue, as demand from the West Coast may keep supplies on the "tightish" side. On the other hand, he pointed out that ethanol plant margins are healthy.
"Plants are making more money than they have in a long time," he said. "If they have the ability for extra production, they are going to throw out there. But so far, we have not been seeing a lot of extra production, if at all."
Midwest DDG demand remains fairly steady, but the stronger domestic demand is driven more in delivered areas because of the lack of railcars, he said.
Export demand has also remained fairly steady.
"The numbers for trading delivered Chicago or container yard on the West Coast are more than delivered prices in China or Asia," he said. "That tells me the tightness in the market is not being driven by new demand, but re-sellers buying in to cover what they've already sold."
In coming weeks, Broderick said, even if prices don't continue to rise on the coast, the market will remain tight.
He advised livestock producers who need to buy DDG to get what they need for the remainder of December. "We may see competing prices fall, but there is enough pent-up nearby demand to keep any DDGS weakness in check."
Cheryl Anderson can be reached at email@example.com.
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