High feed costs weigh on DDGS demand in the US
Demand for distillers dried grains with solubles (DDGS) in the US is weakening amid tighter hog margins and high prices for key feed ingredients. Livestock producers are becoming more cautious with inventories and are largely buying feed only to cover near-term needs.
Profitability is being squeezed by elevated prices for corn, soybean meal and DDGS. On a protein-value basis, DDGS is priced at around 120% of soybean meal, reducing its competitiveness in feed rations.
The situation is also being pressured by a weaker pork market. By late September, pork loin prices had fallen to around $1.20/lb from about $1.36/lb in early August, further narrowing producer margins.
Under these conditions, hog producers may avoid expanding herds or even reduce production. This, in turn, is likely to limit demand for DDGS and other feed ingredients in the coming months.
At the same time, DDGS supply could increase as ethanol plants complete seasonal maintenance and the new corn crop enters the market. A combination of higher supply and weak livestock demand could put additional pressure on US DDGS prices.
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