July 8, 2013

 

 

Buoyed by its soaring price, which hit a nine-month high this week, US dairy and livestock producers may consider investigating distillers' grains as an alternative to soymeal.

 

Soymeal futures for July hit US$499.00 a short ton in Chicago this week, the highest for a spot contract since September, and up by more than one-quarter from a mid-April low.

 

The rise reflects strong demand from both domestic users of the soy processing product, a high-protein feed ingredient, and consumers abroad, who have lifted imports to record levels.

 

World supplies of soy themselves were tightened by drought-hit US and South American harvests last year, with logistical hiccups in Brazil, and a farmer hoarding in Argentina, keeping a squeeze on availability.

 

This year's slow US sowing season has only enhanced prospects for soy prices near-term, in likely delaying the harvest and leaving users to rely longer on current thin supplies, improving the case for rival feed ingredients, Jerry Gidel, chief feed grains analyst at Rice Dairy, said.

 

"With this summer's soymeal demand extremely strong because of hefty domestic and foreign demand, we suggest dairymen strong consider alternative protein sources," he said.

 

Citing "cost and better availability", Gidel recommended livestock producers "consider dried distillers' grains as an alternative".

 

There was some evidence already of increasing popularity, with prices of dried distillers' grains, or DDGs, rising last month despite strong US output of ethanol from biofuel plants, which manufacture the feed ingredient as a by-product.

 

DDG prices in Illinois rose by 4.5% to US$240.00 a tonne during June, according to Iowa State University, less than half the percentage rise in soymeal prices.

 

The uptick in ethanol output reflects the resilient price of oil, which has been buoyed of late by the crisis in Egypt, which controls the Suez Canal, at a time when corn prices stand well below highs of more than US$8 a bushel reached a year ago.

 

Rising prices of DDGs only stand to increase ethanol plants' margins, whose poor levels last year forced many of them to mothball operations.