The market for dried distillers grains has been slow in recent weeks as demand dwindles and livestock producers find other feed sources due to DDG prices being at a premium to other feedstuffs.
According to Joel Karlin, contributing DTN market analyst and commodity manager for Western Milling in Goshen, Calif., the market on the West Coast has been very quiet and prices steady, as demand slips based on DDG’s high prices relative to corn and canola meal and the increased availability of mid-range-quality alfalfa hay.
“Use of DDG is just so-so as the energy component of rations are being satisfied by corn that is $60 per ton cheaper than DDG while canola meal and lower-grade alfalfa hay is satisfying protein requirements,” Karlin said.
Some merchandisers have told DTN in recent weeks that supplies of DDG are somewhat tight. However, Karlin reports that supplies on the West Coast have been good due to slowing demand and a milder winter than last year contributing to better rail transport.
After 2014’s trade debacles with China, Karlin said that the country’s DDG imports have picked up, although some shipments have been delayed by the ongoing labor strikes at western ports. Container movements are reported slow on the West Coast as the International Longshore and Warehouse Union is on strike, slowing movement of containers in and out of the U.S.
The larger concern about China is the marked slowdown in its economic growth, Karlin said.
“Growth in the Chinese economy is seen now at its lowest pace in over a generation with some forecasters looking for China’s 2015 Gross Domestic Product to come in a less than 7%,” he said. “This has pared Chinese demand for a number of commodities including DDG.”
The decrease in DDG shipments to China last year due to the MIR 162 controversy and the resulting DDG price decline has helped boost imports to other key regions, Karlin said.
Total sales to Mexico are up 23% from the year prior, while South Korea sales are up 75% and Vietnam is up 83%.
“Demand to the nations has been steady as good internal demand has been offset by the rising foreign exchange value of the U.S. dollar and falling high-protein meal values,” he said.
In coming weeks, Karlin said he believes the market will remain somewhat lackluster.
“We are in a sluggish point of the year, so I imagine that markets will stay very quiet at least until the start of the 2015 growing season in the Northern Hemisphere,” he said.
Karlin said any end users looking to buy product should remember this is the season DDG prices are typically at their highest.
“Seasonally, this is one of the worst times of the year to buy DDG with late February-early March often representing the highest values of the year with prices gradually falling all the way from now until August when DDG values tend to make their lows for the year,” he said.