US sorghum exports need demand generation to stave off China tariff impact

China’s decision to apply tariffs on US sorghum exports leaves the sector in a precarious position, market sources told Agricensus Tuesday, as the grain will have to price at levels that will entice new demand outlets.

“With this anti-dumping for US sorghum that China is imposing, we need to see where US sorghum can go,” one Asia-based market source said.

“It’s a very difficult situation, but not totally unexpected… we need to find new consumptive markets to take it,” a second source said.

As of Tuesday, China will demand a 178.6% deposited on the value on US sorghum shipments headed to China.

Mexico, Japan, Spain, South Africa and East Africa have regularly imported sorghum, but China has been the major importer – with the grain proving to be an early fall guy in burgeoning US-Sino trade tensions.

Sorghum acreage in the US has been in decline in recent years, estimated at 8.5 million hectares in the 2015/16 marketing year, shrinking to 6.7 million ha in 2016/17 and then to 5.6 million ha in the current marketing year, according to the USDA.

That means the US is on course for production of 364 million bushels (9.24 million mt), with exports put at 245 million bushels (6.22 million mt).

Sorghum exports in the current marketing year are 3% ahead of volumes seen at the same point of 2016/17, but just under 89% of that marketing year’s volume headed to China.

“The US would still need others to absorb the Chinese programme… South Korea would look at it if it had a big discount versus corn,” the first trader said, but the presence of tannins in sorghum made it a difficult change to make for South Korea’s animal industry.

Ethanol as an outlet?

Equally, the US could see some volumes taken into the ethanol production pool, but that may only amount to 25 million bushels of corn, according to market sources.

Sorghum can be blended in with corn to be ground into ethanol, but can only contribute a maximum of 40% of the blend before the quality of co-products like DDGs suffers, and would only be viable at 90% of the cost of corn, according to a US-based source.

“There are really only ten plants or so that have enough sorghum around them to even mess with it,” Advance Trading’s Kelly Herrick told Agricensus.

So far, sorghum

China announced an investigation into accusations of US subsidies for sorghum damaging the domestic industry, but announced earlier today that the evidence was enough to apply a substantial deposit to any company looking to bring sorghum into China.

“Today’s decision in China reflects a broader trade fight in which US sorghum farmers are the victim, not the cause. And US sorghum farmers should not be paying the price for this larger fight,” the National Sorghum Producers said via an email press release.