US biofuel policy increases ethanol margins; DDGS market sees limited impact

US biofuel policy updates have increased ethanol margins but failed to support the dried distillers grains with solubles market, according to sources June 20.

The anticipated rise in ethanol output may further pressure DDGS values, which are already burdened by weak feed demand, a competitive environment, and limited exports.

The Trump administration has proposed raising biofuel blending targets through 2027, with the EPA setting volumes at 24.02 billion gallons for 2026 and 24.46 billion for 2027, up from 22.33 billion in 2025. Much of the increase comes from a higher biomass-based diesel mandate, aimed at boosting domestic biofuel production. The policy, announced June 13, also seeks to reduce emissions, promote energy independence, and offer longer-term regulatory certainty for the ethanol and farming sectors.

Despite this optimistic outlook for ethanol, market participants remain cautious about DDGS.

"Every time I see something that's positive for ethanol, I always think bearish DDGS," said one DDGS market participant. "I'm not particularly confident about these mid-profit products."

This cautious sentiment extends to corn's influence on DDGS as well.

"Nothing really great for corn yet," another market source said.

Stronger ethanol margins, paired with seasonal E15 demand, are expected to drive production higher this summer. This also means more DDGS will be generated as a byproduct. However, without a corresponding rise in demand, sources anticipate that more DDGS will flood the market, putting further downward pressure on prices.

"If margins are there, the plants are going to run," another source said. "People are going to drive, but that doesn't mean you'll get stronger DDGS values."

An agriculture market participant added that while supply could increase with higher ethanol production, demand remains weak due to corn and soybean meal price spreads.

"Yes, supply could increase from higher ethanol production, but demand remains weak because of corn and soybean meal price spreads," the source said. "Moreover, mandates could lead to increased global soybean crushing for oil, extending the soybean meal oversupply and deepening weaker DDGS demand."

Earlier this year, barge DDGS prices briefly rose near $200/st amid a wave of strong buying supported by demand and easing freight delays. However, that momentum has weakened.

"I definitely do not see it trading into the 200s again," another source added, expressing skepticism that prices could reach those levels anytime soon.

Adding to market concerns, the latest USDA, Census Bureau and US Department of Commerce data showed that export volumes of DDGS declined to 894,197/mt in April from 1,027,002/mt in March, a 12.93% decrease.

"People are trying to put on some summer sales, but it's been relatively difficult," the source said. "Right now, I'm just not finding enough reasons to be optimistic."

Looking ahead, DDGS prices are expected to remain flat as the market remains subdued.

Platts, part of S&P Global Energy, assessed DDGS CIF New Orleans for June delivery at $191/st on June 20, and the DDGS Chicago truck values at $167/st for the same delivery period.