Chinese Moonshine, Hogs, and Drought Fuel Sorghum Boom on Plains
Wheat, corn and soybean prices have been in a slump the past two years and as a result grain farmers across the U.S. Great Plains are switching to sorghum, a lesser known grain that is offering returns as much as .85 cents per bushel more than corn.
Sorghum ranks number five amongst grains in the world in total output. It’s mostly used in animal feed or to make ethanol, but can also be found in products like couscous or popped like popcorn. Native to Africa, it is attractive to farmers because it is heartily resistant to drought and cheap to plant; it costs $142 per acre compared to $350.33 per acre for corn or $187.07 for soybeans.
More significantly, demand for sorghum is surging in China, where the grain is not subject to quotas as corn or soybeans are, and where sorghum is commonly used to make a whiskey-like liquor called baiju, and to feed the country’s enormous hog herd.
China began increasing its sorghum imports in 2013, and the U.S. Department of Agriculture (USDA) predicts that imports for this year will jump 68% to a new record of 7 million tons. The U.S. Grains Council estimates that 10% of those shipments will be used for the production of baijiu. Domestic sales of the liquor climbed 5.5% in 2014 year on year, according to data from Nielsen, and Chinese producers are looking to expand sales into Western markets, which could help support continued growth.
U.S. exports of sorghum this year are on pace to be the highest in 35 years, as plantings are expected to jump by 14% to 8.148 million acres, according to a Bloomberg survey. For the season beginning September 1, the U.S. is forecast to account for 74% of global sorghum exports - most of which is bound for China - compared to a 15% global share for wheat. The latest estimate from the USDA forecasts a 5% increase in acreage to 7.5 million acres.
However, whenever a market soars, the question usually remains if that growth can be sustained. Even if exports decline, U.S. farmers will likely continue to plant sorghum as 28% of the High Plains are in moderate to extreme drought compared to 11% at the beginning of 2015.