U.S. sorghum farmers are celebrating a rebound in demand from China. Just this week, USDA reported a sale of 32 million bushels to China, which marks the largest sorghum export sale ever. National Sorghum Producers (NSP) says the sale smashed the previous record of 23 million bushels, which was sold in December 2014.
“The announcement yesterday of the largest sale ever in U.S. history is quite impressive,” says Tim Lust, CEO of NSP. “When you look at just the magnitude of this week’s sale announcement of 32 million bushels, it accounts for 9% of our entire crop that was sold in one week.”
Lust says U.S. sorghum producers have now experienced 90 days of solid sales from China, momentum they hope will continue. What’s driving these historic buys? Lust thinks Phase One is helping incentivize the renewed interest, but it’s also added need from livestock feeders. Add to that a short crop coming out of Australia, one of the United States’ biggest competitors for sorghum, and it seems China's need for sorghum is growing.
“With Australia having a short crop and that country being about one million tons short there from Australia, certainly we're moving into that need first,” says Lust. “Then we're selling a lot right now to southern China on the feed market. From a price standpoint, the grain prices in China have continued to rise, and U.S. sorghum is working very competitively into some of those southern China feed markets, as well.”
Arlan Suderman of StoneX Group agrees, saying feed demand is playing a key role in the increased interest from China.
“Some of the U.S. sorghum imported into China goes into the production of a favorite alcoholic drink there, but the majority is to feed buyers who find it easier to import than corn, with fewer restrictions than corn,” says Suderman. “They don’t have to worry about import quotas and they don’t need to worry about passing GMO inspection approval.”
Lust says the tariff on U.S. sorghum is minimal, which means with higher commodity prices within China, U.S. sorghum is more price attractive for feed users right now. Lust says the general assumption initially was due to African Swine Fever (ASF) and lower livestock numbers, feed demand in China would take a while to rebound. However, he says that has not been the case.
“Things that we really thought would keep feed demand down for a long time, aren’t happening,” says Lust. “I think what we're seeing to some extent is more commercialization in some of that production, and that commercialization needs feed grains and they need protein. So, I think we're really seeing a rebound there faster than what a lot of people expected, which is very positive for our industry, but frankly, I also view is very positive for just us commodity complex.”
Lust says there are positive signs indicating China will continue to buy U.S. sorghum, including some buyers returning to the market who have been absent for 5 years.
“Our traditional customers and some of our historical customers have been very aggressive buyers in terms of this, even customers that that we only really saw in 2015 are coming back into the market,” says Lust. “We are excited to see that diversity coming in and from those new buyers, as well.”
Suderman also thinks there are signs that show China should continue to buy U.S. sorghum. However, he cautions China isn't always a reliable source for exports.
“Fundamentally, the Chinese demand would appear sound for some time, but that may not be the case from a policy standpoint,” says Suderman. “Food self-sufficiency is a major thrust of the Chinese Communist Party currently with the coronavirus pandemic increasing their focus on meeting needs without importing. As such, I expect it to remain strong over the coming year, but that can never be taken for granted. It could end overnight via a policy from the top of the government.”
Sorghum producers understand Suderman’s caution all too well. China sparked war on China’s sorghum industry in the spring of 2018, sending U.S. sorghum growers on a rollercoaster ride of uncertainty. China slapped a 179% import tariff on the crop, accusing American farmers of dumping on its markets. As that happened, China was the largest buyer of American sorghum products, importing $960 million worth of sorghum the year prior. Sorghum growers and the NSP spent a hefty amount of money fighting that accusation and the charge was finally dropped.
While the risk is always there that China could drop off and quit buying, sorghum producers are celebrating the renewed interest and improved basis today.
“The job on the sorghum side has been in basis, and we've seen significant basis increases,” says Lust. “As we went around the room today in our NSP board meeting, whether it was a producer in Nebraska, western Kansas, Texas Panhandle or even the Gulf Coast, you are seeing those significant basis increases that are getting back to the sorghum farmer level. Certainly, that is something that we're happy to see. In my career, that's not always happened. Sometimes we had the strong sales but it was really hard to see that back in in local farm prices and this is certainly one where we are seeing that move to the farm level, no matter where you're at in the United States. “