Grain growers across the U.S. Midwest and Southern Plains do not have much to smile about lately, with most bracing for a drop in farm revenues due to the lowest crop prices in years and abundant supplies.
But growers of grain sorghum, or milo, can be cheered by the fact that theirs is the most sought-after crop by China, at least from an import perspective. China is projected to import 4.3 million tonnes of sorghum in 2014/15, placing it atop the country’s grain shopping list in terms of volume for the first time.
The recent outperformance of sorghum prices relative to corn in Kansas provides another reason for sorghum growers to feel upbeat, even if prices remain more than $1/bushel off their 2014 highs. Kansas is the top sorghum growing U.S. state and No. 8 corn grower.
But before corn growers plan switching crops to sorghum, they should bear in mind that revenues from corn production remain in a different league to sorghum. Corn receipts in Kansas topped $2.3 billion last year, compared to $680 million for sorghum. This earningschasm in turn suggests that even though China may have developed a taste for sorghum, it remains a specialty crop for most and is unlikely to threaten corn’s role as leader of the grain arena any time soon.
IMPORT SURGE IS A BALANCING ACT
Sorghum’s ascent to the top of China’s grain import list has been sudden and dramatic, with China’s projected imports for 2014/15 set to be more than 1,000 times larger than for the 2010/11 year.
At face value, this burst in demand might suggest some new and insatiable hunger for sorghum in China’s vast grain feed and fuel consumption pipeline. And certainly sorghum use as an animal feed and feedstock for ethanol has picked up in locations where corn is either scarce or expensive.
But the spike in import tonnages has more likely been driven by the government’s desire to even out crop purchasing patterns following heavy bursts of corn and rice buying in recent years. China’s strong and persistent entries into the corn import market in 2011/12 and the rice market in 2012 left its traders exposed to the strong run-ups in the price of those crops at the time. These, ironically, were fueled largely by knowledge that China was doing most of the buying.
The country’s chief grain buyers are keen to avoid a repeat of that scenario, and have taken pains to develop a more balanced crop import program going forward, with no grain taking on outsized importance.
Indeed, the breakdown of China’s current-year grain import intentions is the most balanced in more than two decades, suggesting the country’s buyers should minimize the impact of a run-up in prices for any one crop on their shopping list.
That said, China’s intention to import 4.3 million tonnes of sorghum this year represents 56 percent of total sorghum imports for the year, a far higher proportion of world trade than China’s projected 2 percent share of corn imports and 1.2 percent of wheat.
What’s more, the United States is by far the largest sorghum exporter, and so stands to be the chief beneficiary of China’s increased demand for the grain even as Chinese traders remain averse to buying large tonnages of corn due to ongoing disputes over unapproved genetically-modified traits in the U.S. corn pool.
So even though overall crop prices remain mired in the doldrums following record-large harvests this year, the prospect of record-large sorghum purchases by the world’s top grain consumer may be viewed as a bright spot for U.S. growers, even if it is in a specialty corner of the grain market.
(Reporting By Gavin Maguire; Editing by David Gregorio)
Source: Let’s hear it for sorghum, the most sought-after grain by China: Maguire | Reuters