The rise in expectations for US sorghum exports, particularly to the key Chinese market, may be reaching their limit, with the surprisingly resilient demand cutting their price competiveness.
The US Department of Agriculture – expanding on the reasons behind an upgrade on Friday to its forecast for US sorghum shipments in 2015-16 – said that “export prospects have strengthened, as indicated by US Census Bureau trade data through April”.
“Shipments to China are continuing,” defying concerns among many commentators that a focus by Beijing on eroding huge domestic corn stocks would cut demand for imports of rival feed grains, such as sorghum.
The US Grains Council said that in fact “strong corn products demand in China is pushing prices higher”, supporting demand for alternatives.
Although, at 5.9m tonnes so far this season, US sorghum exports to China are down by more than 800,000 tonnes, that is a less steep decline than some observers had feared.
Meanwhile, volumes exported to Mexico have soared from zero to more than 270,000 tonnes.
The USDA on Friday lifted by 15m bushels to 330m bushels its forecast for US sorghum exports in 2015-16, which ends in August, leaving the estimate only 23m bushels short of last season’s record high.
This was before the USDA on Monday revealed the sale of 115,000 tonnes of US sorghum to an “unknown” import destination, which traders assumed to be China.
US vs Australia
However, the resilient demand is, in supporting prices of US sorghum, boosting the appeal of supplies from alternative origins, of which Australia is the main one, Nidera Australia said.
“The Chinese are still in the market” for sorghum, the grain trader said.
“Over recent weeks the [price] spread between US and Aussie origin sorghum has narrowed to around $10 a tonne,” as measured delivered to China.
“Bulk business has been done around this premium [of Australian prices] over US values recently,” Nidera Australia added.
“With a sizeable exportable surplus in the domestic balance sheet, it seems increasingly likely that more business will be done over the coming months,” the trader said, flagging a “quite subdued” Australian sorghum export market at the moment.
US sorghum prices, as measured in the key Texas market, have risen by approaching 9% this month to $196.25 a tonne as of last week, according to the US Grains Council.
By contrast, Sydney sorghum futures have shown a 1.2% decline to Aus$235 a tonne, against a largely flat exchange rate between the Australia and US dollars.
(Source – http://www.agrimoney.com/news/australian-shippers-to-move-in-on-resilient-us-sorghum-exports–9658.html)