US sorghum export prices have expanded their premium over corn to the highest in more than a year, underlining the prospect of weakened trade – to the benefit of rival Australian shipments.
Sorghum prices, as measured in New Orleans, have leaped by 17.2% in two weeks to $400.60 per tonne, according to US Grains Council data.
The jump expanded their premium to corn prices, as measured in the US Gulf, to $75.60 per tonne, the highest in 13 months, and up from just $20.60 per tonne at the start of the month.
The outperformance of sorghum prices reflects particularly poor prospects for the ongoing US harvest, with production reliant on central and southern Plains states which, as the USDA said last week, are suffering “severe, ongoing drought”.
While the USDA overnight trimmed its rating of the US corn crop by 1 point to 52%, in terms of the proportion viewed as in “good” or “excellent” condition, the figure for sorghum stood at just 20%.
That compared with the 37% of US sorghum viewed as being in “poor” or “very poor” condition.
Lowest yield in 48 years
Indeed, the USDA forecasts the domestic sorghum yield this year at just 46 bushels per acre (2.89 tonnes per hectare), down by one-third year on year to “the lowest national average since 1974”.
Production, forecast down 44% year on year at 252m bushels, is expected at a 10-year low, a reflection of the dryness which many observers blame on La Nina.
La Nina is linked to drier-than-normal winters in southern Plains states such as Texas, an important state for cotton production too.
The hangover from these dry soil conditions can, through leading to warmer-than-normal atmospheric conditions, bring drier summers too, according to official US meteorologists.
The USDA forecasts US sorghum exports in the newly-started 2022-23 plunging by one-third to 4.95m tonnes, “as limited supplies pressure trade potential”.
By contrast, Australia is expecting another bumper sorghum harvest in 2022-23, of 2.6m tonnes, “68% above the 10-year average”, according to the country’s official Abares crop bureau.
Unlike in the southern US, La Ninas are a boon to producers in eastern Australia, where sorghum is grown, bringing ample rains.
“Elevated soil moisture levels and above-average rainfall forecast for [southern hemisphere] spring in New South Wales and Queensland are expected to contribute to sorghum area planted which is 42% above the 10-year average… and strong yield prospects,” Abares said.
And, with US exporters on the back foot, Australia’s sorghum shipments are “expected to reach 1.8m tonnes, 144% above the 10-year average”, and a record high on the bureau’s records.
As for where Australia’s sorghum is headed, “much of the increase… is expected to go to China, the primary destination for Australian sorghum”, accounting for more than 80% of the country’s exports.
“This increase fully offsets a reduction in projected US sorghum exports.”
China is expected to remain a ready market, thanks to the dent to its own grain production prospects from what Abares termed “recent drought conditions”.
With China’s usual purchases of corn from Ukraine restricted too, “imports of alternative feed grains including barley and sorghum play an important role in easing the tightness of China’s domestic feed grain supply”, the bureau said.
Customs data released on Sunday showed China’s overall sorghum imports for 2022 up to August at 8.01m tonnes, up by 1.30m tonnes year on year.
However, even as Australia is thriving in sorghum trade, with its share of China’s imports in 2022 up to July more than doubling to 19.5%, Abares acknowledged that a fresh threat may be approaching, if China turns to Brazilian corn for feed needs.
“Brazil may become a major source of Chinese corn imports,” the bureau said, noting a revamp of phytosanitary requirements blamed for hampering trade on this route, despite a trade deal signed in 2014.
“The successful revision of these protocols may support more substantial volumes of Brazilian corn imports to China, easing tightness of China’s domestic feed supply.
“Increased corn imports from Brazil may reduce demand for other feed grains including sorghum.”