The timing is right for China to make purchases of U.S. sorghum. As China’s demand for imported coarse grains continues to grow, U.S. sorghum becomes an attractive commodity for its rapidly expanding market.
The U.S. Grains Council has been closely monitoring increasing demand and new market developments in China. Since late 2012 the Council has worked with the United Sorghum Checkoff Program to explore opportunities to facilitate sales of sorghum by both container and bulk vessel. The Council has been able to proactively take action to respond to China’s sudden decision to import sorghum in higher quantities than in the past. According to Alvaro Cordero, USGC manager of global trade, purchases may be much higher and not a one-time thing.
“All conversations I have had with the industry, both in the United States and China, indicate that we may see this purchasing pattern continue,” Cordero said. “At this time, the market is expecting delivery of 600,000 metric tons (23.6 million bushels) and some traders estimate that number will be significantly higher in the upcoming crop year.”
Unlike corn and wheat, sorghum is not subject to China’s tariff rate quota.
“Tariffs are at 2 percent for food use and 9 percent for feed with a 13 percent value added tax. However, today’s U.S. sorghum price is trading at a $40 per metric ton price advantage over Australian origins. This provides a strong incentive for importers and end-users to purchase sorghum from the United States,” Cordero said.
Historically, China imports the majority of its sorghum from Australia, Myanmar and Japan for alcohol use. However, the increasing demand for coarse grains has prompted China, for the first time, to expand its feed rations to include sorghum.
The 2013/14 U.S. sorghum crop is expected to significantly increase from the previous year’s production to roughly 9.1 million tons (359 million bushels). In the face of the increase in production, exports are expected to double from tons 1.9 million tons (75 million bushels) in 2012/13 to 3.8 million tons (150 million bushels) in 2013/14.
“This new demand from China is critical to maintaining a healthy U.S. sorghum industry. Equally important is that the Chinese buyers properly use sorghum in their milling and rations. These two factors will enable future exports and increase consumption of sorghum as a feed component in China,” Cordero said.
The Council will continue to monitor and foster this market opportunity by providing importers and end-users information on procurement, nutrition, and crop progress in the U.S., as well as continuing its trade servicing support.