December 17, 2013

 

US sorghum exports may rise on China's rejection of GM corn

 

 

Following China's rejection of American corn imports on concerns of unapproved GMOs, US sorghum exports, already forecast at a five-year high, could face further upward pressure.

 

An "unintended" consequence of the Chinese rejection of US corn cargoes, over claims of containing unapproved genetically modified varieties, "could be heightened demand for alternate feed grains from a range of origins", Australian-based broker Pentag Nidera said.

 

Nidera said that this could be significant for both US and Australian sorghum, adding that barley trade could be boosted too. However, the impact looks likely to be particularly significant for US sorghum, given its discount to Australian supplies, for which prices are being boosted by tight supplies left over from the last harvest and a disappointing planting campaign so far for the 2014 crop.

 

"Prices are sub-US$300 a tonne from the US, compared with more than US$300 a tonne free on board (FOB) from Australia," Pentag grains trader Tim Murray, adding that it is more likely that Chinese buyers will turn to the US for sorghum as a replacement for corn, with quality a factor too.

 

Chinese imports of Australian sorghum are typically used for making the increasingly popular spirit Baiju, with US supplies bought as a feed ingredient.

 

With sorghum not subject to the same Chinese import restrictions as corn, the grain was already proving increasingly popular, with the country's imports forecast by the USDA to hit 2.0 million tonnes in 2013-14 - triple last season's record high.

 

Chinese users have already ordered or imported 1.0 million tonnes of US sorghum so far in 2013-14, which began at the start of September.

 

The comments come as investors are still attempting to gauge the impact of China's rejection of some US corn cargoes, both on prices for the grain itself and for other markets.

Concerns have mounted that the rejections could spread to distillers' grains, the high protein feed ingredient which is a by-product of ethanol manufacture, with implications for rival protein sources.

 

Fears over DDGs "have soymeal and soy traders concerned", Paul Georgy at Chicago broker Allendale said. "If China doesn't take DDGs, it now begins to compete with soymeal here at home."

 

In Australia, traders are waiting for the results of showers in Queensland, the major growing sorghum-state, to assess the prospect of a late pick-up in sowings. While forecast rains failed to materialise, "scattered rains could produce 10 millimetres-40 millimetres," Murray said as the showers started.

 

That would be a big incentive for farmers to sow, given prices which are some AUD50 (US$45) a tonne higher than a year ago. In Sydney, sorghum futures for January settled 0.6% higher at AUD293.00 (US$262) a tonne, a five-month high for the contract. Cash market prices are about AUD310 (US$277) a tonne, Murray said.