China's US sorghum buys 'far bigger than thought'

02.08.2013

China's orders for imports of US sorghum may be far bigger than farm officials are letting on, raised by the country's thirst for a liquor based on the grain besides by the need by livestock feeders for a cheaper alternative to corn.

According to US Department of Agriculture data, Chinese buyers have bought only 13,500 tonnes of American sorghum for 2013-14.

However, in fact orders have reached 400,000 tonnes, the majority of which will be shipped in August to November to southern China", the International Grains Council said.

"We have got that from a couple of different sources," IGC analyst Chris Lawson told Agrimoney.com.

While the IGC and USDA use different crop years – the former July to June and the latter September to August – this fails to explain the anomaly, with US officials estimating combined export sales and actual shipments to China at some 62,000 tonnes in 2012-13.

'Gone gangbusters'

Mr Lawson added that Chinese purchases from Australia had been strong too, seeing prices there "go gangbusters, well above US or Argentine prices".

In Sydney, May 2014 futures closed at Aus$262.50 a tonne on Friday, up 11.2% in the last month.

China, thanks to geographic proximity, sees Australia as a natural source of grain imports.

China's CNGOIC crop bureau said on Tuesday that traders expect the country's imports of Australian wheat to hit a record 3m-4m tonnes this year, after reaching 1.5m tonnes in the past six weeks.

However, bulk sorghum trade to China "is a completely new market for Australia", Mr Lawson said.

Thirst for baiju

While Australia was the major source of China's imports of 300,000 tonnes for 2012-13, on IGC estimates, demand at this level represents a major divergence from levels which, on USDA figures, were only 4,000 tonnes in 2010-11.

The growth reflects not just the quest by livestock producers for a cheaper feed grain, in the face of high corn costs, but also the appetite of Chinese for baiju, a white liquor derived from sorghum.

Baiju accounts for an estimated 99% of spirits consumed in China, equivalent to about 11bn litres, according to International Wine and Spirit Research.

However, a decreasing amount of baiju is being made with domestically grown sorghum, as growers are tempted by rising prices of the likes of corn, rice and wheat to grow alternative crops, the IGC said.

"With lower domestic availability of sorghum, and steady demand for Baijiu, shortages have forced distillers to use alternative grains, or source sorghum internationally."

No TRQ

The growth in imports has been catalysed by clarification by China's General Administration of Quality, Supervision, Inspection and Quarantine (ASQIQ) of its sorghum trade policy, permitting purchases of the grain from Australia, Myanmar and the US.

And, unlike grains such as corn and wheat, of which China has made a strong start in 2013-14 orders, sorghum imports are not subject to a tariff rate quota.

"With the AQSIQ ruling, and lower international sorghum prices, traders in China have been purchasing supplies from the international market," the IGC said.


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