Fears are growing that China may be poised to clampdown on its booming sorghum imports, in an effort to divert feed industry demand to eroding the country’s burgeoning, and “deteriorating”, corn inventories.
The US Department of Agriculture earlier this week, in its first forecast for world crop balance sheets in 2015-16, forecast China’s sorghum imports hitting a record 9.0m tonnes, extending a four-year surge in volumes.
Up to 2011-12, the country had never imported more than 84,000 tonnes of sorghum in a marketing year, and indeed the grain remains free of import quotas.
However, the USDA bureau, in a report published overnight, while acknowledging that Chinese importers have “already signed contracts for large volumes of sorghum to be delivered later this year”, cautioned over the risk of the flood in imports in attract government curbs.
‘Traders are voicing concern’
“The Chinese government has begun to pay close attention to the rapid increase in sorghum imports,” the bureau said.
“Some policymakers reportedly believe these imports make it harder for the government to dispose of [China’s] large corn stocks,” which the bureau forecast rising by 9.0m tonnes to 88.7m tonnes, equivalent to nearly five months’ consumption.
“Import officials have recently begun to enhance inspections and traders are voicing concern that the government may be getting ready to take more concerted action to limit [sorghum] imports.
“Farmers and traders may want to take measures to mitigate risk of trade disruptions and related price volatility in sorghum,” the report advised.
Last week, China’s quarantine authority said that officials in Shenzen had detected a fungus which causes “grapevine blight” in a 49,000-tonne cargo of US sorghum.
China’s AQSIQ quality supervision and quarantine administration had earlier this year demanded enhanced efforts to boost inspections of sorghum imports, the statement added.
Meanwhile Darrell Holaday, at US broker Country Futures, said that Chinese authorities “rejected a cargo of sorghum today from Australia because one Johnson grass seed”.
China last year clamped down on corn imports from the US, on grounds of the cargos containing a Syngenta genetically modified variety not approved by Beijing.
The move led to the refusal of cargos of US corn shipped to Chinese ports – at huge costs to merchants such as Cargill.
Although China has now approved the variety at the heart of the cargo rejections, the country’s imports from the US, historically the origin for the great majority of overall corn buy-ins, are expected at 103,000 tonnes for 2014-15, and 100,000 tonnes for next season.
“US corn exports to China are not likely to recover significantly in 2015-16 due to high domestic stocks and the perceived risk of importing US corn,” the bureau said.
“Importers continue to worry about the risk of biotech-related trade disruptions,” meaning that “very few” merchants are “willing to accept the financial risk of a corn shipment being rejected.
“As a result, most importers are… despite higher costs and less consistent quality… currently sourcing corn from Ukraine,” where genetically modified corn is not approved for growing.
The bureau underlined expectations that Chinese corn output will hit 226m tonnes this year, a rise of 11.5m tonnes, based on a forecast of a 2% rise in sowings, as growers swap to the grain from cotton and soybeans.
However, with output comfortably exceeding consumption, the bumper harvest, and a government purchasing programme, will lead to growth in inventories, which are “straining government storage facilities.
“The build-up in stocks is also making it difficult to rotate stocks, and inadequate and antiquated storage facilities are leading to deteriorating quality,” the bureau said, flagging talk of moves to encourage industrial use of the grain to use up degraded crop.
“Adding to these challenges, there have been reports of corruption and mismanagement at SinoGrain, a state owned company charged with managing government reserves.”
For sorghum exporting countries, notably Australia and the US, a clampdown by China on imports of the grain would remove the driver behind a more than doubling in world imports in the past three years to 10.7m tonnes.
Global imports are forecast by the USDA hitting a 31-year high of 11.0m tonnes in 2015-16.
The increased trade has, unusually, lifted prices of sorghum above those of corn in the US, where farmers are expected to receive $3.90-4.10 a bushel for the red grain from last year’s harvest, compared with $3.55-3.75 a bushel for the yellow grain.
For next season too, sorghum, at $3.40-4.20 a bushel, is expected to offer growers a premium to corn, at $3.20-3.80 a bushel.
(Source – http://www.blackseagrain.net/novosti/fears-grow-of-chinese-clampdown-on-soaring-sorghum-imports-1)