Eroding production margins have resulted in lower U.S. ethanol output in the last half of 2018. According to monthly National Agricultural Statistics Service (NASS) Grain Crushings data, U.S. distillers dried grain (DDG) output in the first ten months of 2018 fell to 3.515 million metric tons (MMT) versus 4.012 MMT the same period in 2017. Monthly data since January 2015 shows that U.S. DDG output in 2018 has consistently fallen below previous year levels since May 2018.
Losses in ethanol exports in the last half of 2018 have been blamed for the slowing of DDG production, and prices for the feedstuff in pork production have risen on the tighter supplies. As a result, soybean meal has become more attractive for domestic hog feeders as prices of the cheaper and relatively less-nutritious DDGs have risen. The following chart shows domestic cash prices for DDGs and soybean meal in the U.S. Midwest going back to January 2015. The data shows that DDG prices have surged nearly 29 percent since the first week of October while soybean meal prices have fallen by 3 percent over the same period. Domestic soybean meal prices may need to maintain depressed relative to other feedstuffs in order to prevent a sizeable build in soybean meal stocks.