Dried distillers grain (DDG) market prices are near year-ago levels despite corn prices being significantly below 2019 levels, the Livestock Market Information Center (LMIC) reported. Last week, prices averaged $136 per ton across the 10 markets that LMIC tracks.
DDG markets have been greatly affected by ethanol plants shutting down because COVID-19 resulted in decreased demand and lower oil prices. In the short term, LMIC said that dramatically limited the production of ethanol and simultaneously tightened the supply of byproduct DDG feed.
In the short term, rations that heavily depended on DDGs were slow to change, primarily due to biological limitations since abruptly changing rations for animals on high-performance diets is nutritionally challenging. Further, LMIC said there needs to be a conviction that feedstuff costs are changed for a long enough time frame to make ration adjustments workable.
“These two influences of demand and supply have pushed prices above where the normal relationship with alternative feedstuffs,” LMIC said.
Those animal ration adjustments have been occurring recently, causing the premium of DDGs versus other feedstuffs to slip, although it still remains above what is typical, LMIC noted.
However, there may not be much more normalization of the DDG market compared to other feedstuffs until more ethanol is produced. Much of that, LMIC said, will depend on the profitability of ethanol plants, most of which can resume production quickly if the economic conditions are right.
“Critical parts of the U.S. economy are reopening, and prospects for air and automobile travel are improving, which is promising for fuel demand this summer. That could translate into a turning point for ethanol output, resulting in more DDG production and, hence, lower DDG prices,” LMIC said.
Oil and ethanol prices generally have been on the rise lately, with the Iowa plant ethanol price reported at $1.22/gal. during the week ending June 20. LMIC said this is the highest price since the last week of February. The lowest point was 74 cents/gal. in mid-April.