China’s Anti-Dumping Deposits on U.S. Cargoes Bolsters Australian Sorghum

0

613 - China’s Anti-Dumping Deposits on U.S. Cargoes Bolsters Australian Sorghum

Australian sorghum prices are seen rallies one day after China announced to impose anti-dumping deposits on imports of U.S. sorghum equal to 178.6 percent of their value. The deposit was higher than expected and efficiently halts imports from the U.S. of the grain demanded mainly in livestock feed and the spirits sector. As the second largest exporter of sorghum in the world, Australia is placed great expectations on replacing U.S. as China’s uppermost sorghum importer, and bids for cargoes of Australian sorghum yet increased AUS$10 from prices quoted before the China’s tariffs on the U.S. grain.

The latest sorghum prices are as high as AUS$350 per tonne for grain delivered to the port of Brisbane. According to Rabobank Nederland, Australian sorghum prices have hit the peak over the past four years, already rising 25% since 2018 and 33% compared to that at the end of 2017.

Baijiu Market

The vast majority of the sorghum harvested in Queensland and New South Wales will be exported to China and its dominant market, the Baijiu market. Baijiu, a Chinese spirit made from sorghum and other grains, is a regular on dinner tables and in bars all over China. It is in effect the most consumed spirit in the world with demand at approximately 5 billion liters per year and worth an estimated US$23 billion annually. In 2017, demand for baijiu continually shoot up by 77% and reached its fastest growth rate ever since 2011.

Considering this ancient industry had switched from domestic sorghum to cheaper imported sorghum to supply distillers in recent years, and most of imported sorghum (8.9 million tonnes in 2017-18) came from the United States while about 1.6 million tonnes was sourced from Australia, it is a good entry point for Australia to help supply China’s top drink.

Forward Strength

There is plenty of depth on the bid side of the market. Due to a drought in Australia last year, the total output of wheat was around 1.35 million tonnes, only 67.5% in a normal year. It largely shored up demand for sorghum. Furthermore, dry conditions along the east coast, combined with spring frost recently, have formed an utterly strong local basis to buoy sorghum, increasing concerns about weather issues and the impact it could have on planting of the 2018 winter crop. In addition, the China-Australia Free Trade Agreement (ChAFTA) eliminated the 2% tariff on sorghum and other crops on December 20, 2015, constantly promoting sorghum exports as always.

Price Boost

Traders anticipate China’s tariff requirement on US sorghum to inflate values for sorghum to the point where it will outprice itself in China’s feed market, and the luxurious baijiu industry will turn to local Chinese production and Australia. Coupled with the continuing tight supply of feed grain in eastern Australia, tariff-talk on US trade to China is improving Australia’s sorghum price outlook that is already strong from local factors. Facing the opportunity presented in China, Australia should also consider how to cope with the coming competition between the export and domestic markets for sorghum.

LEAVE A REPLY

Please enter your comment!
Please enter your name here