China Trumps US sorghum

The Western Star - - RURALWEEKL­Y - Owen God­dard Trader COFCO In­ter­na­tional

AF­TER much spec­u­la­tion, China’s Min­istry of Com­merce an­nounced on April 17 that it would im­pose pro­vi­sional anti-dump­ing mea­sures on grain sorghum im­ported from the United States, ef­fec­tive im­me­di­ately. These ac­tions are the lat­est de­vel­op­ments in the tit-for-tat trade war be­tween the two na­tions. This is the cal­cu­la­tion for­mula: Mar­gin amount = (Cus­toms duty paid price × 178.6 per cent) × (1 + VAT), VAT=10 per cent, equat­ing to 196 per cent or around USD$450/MT.

In re­cent years, China has es­tab­lished it­self as the epi­cen­tre of global sorghum de­mand, us­ing sorghum to pro­duce ei­ther feed for live­stock or the pro­duc­tion of their well-known al­co­hol (Bai­jiu). It is im­por­tant to note how­ever that China does not nec­es­sar­ily need sorghum as a feed grain, it merely needs feed grains and will, there­fore, source the cheap­est al­ter­na­tive.

For sorghum to re­place corn as a feed in­gre­di­ent in China, it needs to be priced com­pet­i­tively against their do­mes­tic corn. Most of the US sorghum des­tined for China was in­tended for use as a feed grain. Chi­nese do­mes­tic corn val­ues are around USD$240/MT so surely there is no point ex­e­cut­ing these US sorghum ship­ments into China now.

Trade sources sug­gest there could be as many as 20 ves­sels or 450KMT of US sorghum al­ready loaded or load­ing and des­tined for the al­ready im­pacted Chi­nese mar­ket.

Fur­ther to this there are re­port­edly ad­di­tional de­ferred sales of around 750KMT also af­fected, mean­ing a to­tal of about 1.2MMT of US sorghum. To quan­tify the scale of Aus­tralia’s to­tal sorghum pro­duc­tion, it will be ap­prox­i­mately 1.5MMT this year.

The ini­tial re­ac­tion to this news from the Aus­tralian sorghum mar­ket was pos­i­tive with lo­cal val­ues lift­ing around $20/MT on the ba­sis that China will im­port more Aus­tralian sorghum. The re­al­ity is that Aus­tralian sorghum was al­ready a sig­nif­i­cant pre­mium to US, sorghum landed in China ahead of this an­nounce­ment and the Chi­nese de­mand was al­ready be­ing ra­tioned, as Aus­tralian sorghum only worked into the al­co­hol sec­tor.

Feed­back from China was that higher priced Aus­tralian sorghum would not work, so our val­ues dropped back $10/MT. Re­gard­less of the Chi­nese de­mand, Aus­tralian sorghum is also ra­tioning do­mes­tic de­mand at cur­rent val­ues. Sorghum is trad­ing at a sig­nif­i­cant pre­mium to wheat, so con­sumers are drop­ping sorghum out of their ra­tions, mean­ing we will have more avail­able for ex­port.

The plot thick­ens fur­ther as spec­u­la­tion mounts about what happens to all the dis­tressed car­goes of US sorghum cur­rently afloat.

Traders with ex­po­sure are jostling to find other homes through­out Asia for these ves­sels, and Euro­pean homes are be­ing tar­geted for those yet to load. Most global des­ti­na­tions al­ready have sig­nif­i­cant feed grains cov­er­age, so it is prov­ing dif­fi­cult to find out­lets for im­me­di­ate dis­charge.

As des­per­a­tion mounts to min­imise ex­po­sure and ul­ti­mately stop fur­ther losses, the trade will likely look to dis­count the value into any des­ti­na­tion that can take de­liv­ery. Aus­tralia, as a re­sult, is cur­rently be­ing tar­geted as a po­ten­tial out­let des­ti­na­tion. We are deficit feed grains on the east coast, and the stark re­al­ity is that US sorghum would work into Aus­tralia at a sig­nif­i­cant dis­count to cur­rent do­mes­tic feed grain val­ues.

It is ev­i­dent that Aus­tralia has strin­gent biose­cu­rity mea­sures in place to pre­vent the in­tro­duc­tion of plant and an­i­mal dis­eases. As such, the Aus­tralian Govern­ment au­thor­i­ties will need to be com­pletely sat­is­fied that im­por­ta­tion of US sorghum does not pose any threat be­fore they al­low this to oc­cur.


China’s Min­istry of Com­merce an­nounced it would im­pose pro­vi­sional anti-dump­ing mea­sures on grain sorghum im­ported from the United States.

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