DDGS Demand Remains Strong while Supply Falls

Higher corn prices are shaking the ethanol industry while reduced demand from the pandemic continues to hamper ethanol and DDGS output.  The latest data release from the EIA showed production moved higher the first week of January, as did ethanol stock levels. On the plus side, margins appear to be climbing during the week ending January 15 with a sharp rise in ethanol price and a surge in DDGS pricing outpacing rising corn costs for the week.  This margins 30 percent higher, however ethanol and DDGS output continues to run nearly 14 percent below production rates at this time last year.

The impact of rising corn costs, flailing demand, and rising ethanol stock levels seems to indicate the outlook for DDGS production is going to be limited.  The Renewable Fuels Association (RFA) estimates that about 12 percent of ethanol plants are idled early on in 2021 with another 12 percent operating at reduced production capacity.  Many plants also tend to go down for planned maintenance over the next few months, which could further limit supply.

Forward DDGS pricing indicates producers and brokers are expecting a tight market moving into the second quarter of 2021.  Some ethanol plants are projecting DDGS values reaching $260 to $275 per ton between April and June.