The steeper than normal seasonal price decline for distillers grains (for feed) in March was due to more high-moisture corn (HMC) left from last year’s late, wet harvest, as well as the fact that there just aren’t as many cattle out there to eat the stuff.
According to Darrell Mark, University of Nebraska ag economist, dried distillers grains (DDG) prices tend to drop in March relative to the subsequent spring months. Between 2001 and 2009, Mark says in a recent “In the Cattle Markets” release, the seasonal dip was about 8.5%. Through March of this year, however, weekly DDG prices had declined about 20% compared to January highs.
First, Mark point out March cattle-on-feed numbers were about 6% lower than the previous five-year average; March on-feed numbers were the lowest in the last seven years.
“Another factor lowering demand for co-products from the cattle sector (particularly in Nebraska) is the large volume of high-moisture corn ensiled last fall,” Mark says. “The large size of the corn crop, along with the lateness and high moisture, provided a strong incentive for feedyards to lay in larger supplies of HMC last fall. In many cases, feeders are concentrating on feeding these supplies so they can prepare space to do the same this fall should the growing and market conditions warrant.
“Additionally, because the low in co-product prices generally occurs during the summer months, feeders may use additional HMC now and plan to purchase more co-products this summer.”
Given recent planting projections (see “Corn For Everybody”), barring a weather-related catastrophe, it appears there will be plenty of corn and soybeans in the next crop, so DDG prices will likely continue following seasonal patterns.