China's corn snub could boost US sorghum exports

US sorghum exports, already forecast at a five-year high, could face further upward pressure as one of the knock-on effects, which investors are still trying to assess, of the Chinese rejection of American corn imports.

An "unintended" consequence of the Chinese rejection of US corn cargoes, over claims of containing unapproved genetically modified varieties, "could be heightened demand for alternate feed grains from a range of origins", Pentag Nidera said.

"This could be significant for both US and Australian sorghum," the Australian-based broker said, adding that barley trade could be boosted too.

However, the impact looks likely to be particularly significant for US sorghum, given its discount to Australian supplies, for which prices are being boosted by tight supplies left over from the last harvest and a disappointing planting campaign so far for the 2014 crop.

'Replacement for corn'

"Prices are sub-$300 a tonne from the US, compared with more than $300 a tonne FOB from Australia," Pentag grains trader Tim Murray said.

"It is more likely that Chinese buyers will turn to the US for sorghum as a replacement for corn," with quality a factor too.

Chinese imports of Australian sorghum are typically used for making the increasingly popular spirit Baiju, with US supplies bought as a feed ingredient.

With sorghum not subject to the same Chinese import restrictions as corn, the grain was already proving increasingly popular, with the country's imports forecast by the US Department of Agriculture to hit 2.0m tonnes in 2013-14 triple last season's record high.

Chinese users have already ordered or imported 1.0m tonnes of US sorghum so far in 2013-14, which began at the start of September.

'Soybean traders concerned'

The comments come as investors are still attempting to gauge the impact of China's rejection of some US corn cargoes, both on prices for the grain itself and for other markets.

Concerns have mounted that the rejections could spread to distillers' grains, the high protein feed ingredient which is a byproduct of ethanol manufacture, with implications for rival protein sources.

Fears over DDGs "have soymeal and soybean traders concerned", Paul Georgy at Chicago broker Allendale said.

"If China doesn't take DDGs, it now begins to compete with soymeal here at home."

Queensland rains

Meanwhile, in Australia, traders are waiting for the results of showers today in Queensland, the major growing sorghum-state, to assess the prospect of a late pick-up in sowings.

While forecast rains on Sunday failed to materialise, "scattered rains could produce 10mm-40mm tonight", Mr Murray told from Queensland as the showers started.

That would be a big incentive for farmers to sow, given prices which are some Aus$50 a tonne higher than a year ago.

"If there is rain tonight, the farmer will plant, whether or not conditions are perfect,"

In Sydney, sorghum futures for January settled 0.6% higher at Aus$293.00 a tonne, a five-month high for the contract.

Cash market prices are about Aus$310 a tonne, Mr Murray said.

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