AUSTRALIA – The drop in Australian sorghum prices, which has already fostered ideas of a drop of at least 25% in sowings, may have further to go, Nidera said, warning that values were still too high to attract Chinese demand.

Australian sorghum prices, which approached Aus$250 (US$188.78) a ton in January last year, have fallen more than 20% over the past year, according to World Bank data.

The Australian arm of trading house Nidera pegged prices for 2016-17 crop at Aus$202 (US$152.53) a ton in Queensland, for June-July delivery, although more could be achieved for earlier-harvested crop, with April-May crop achieving Aus$221(US$166.88) a ton in New South Wales.

The decline in prices, coupled with the appeal of rival summer crops, such as cotton, besides a rush last year to sow winter chickpeas, has provoked expectations of a sharp drop in sorghum sowings.

Abares, the official Australian commodities bureau, has forecast sowing plunging by 31% year on year to a 24-year low of to 471,000 hectares.

At Nidera’s Australian business, Peter McMeekin, origination manager, said that “the huge area sown to chickpeas last year and the relatively low forward price for sorghum compared to previous seasons has seen a 25-30% reduction in the area forecast to be planted to sorghum in the 2016-17 season”.

With conditions good but not excellent, with some areas suffering “prolonged dry periods that have stressed the crop”, the outlook is for production to suffer a similar decline, 25-30%.

However, hopes of eroding stocks have been dented by the prospect of domestic demand falling by a “similar proportion” as buyers choose alternative grains.

“The domestic consumer is removing sorghum from rations altogether,” as with feedlots, “or reducing inclusion rates, as the price is high relative to cereals,” in poultry and pork sectors.

This decline “will still leave a large exportable surplus, which needs to move into an export market that is spoilt for choice when it comes to feed grains”,

However, “Australian sorghum is expensive, even with the devaluation of the Australian dollar relative to the US dollar in the past month”.

Apart from small containers going to makers of baiju, buyers in the key Chinese import market are “simply not engaging the Australian market at these prices.

 “The domestic price premium over sorghum out of the US Gulf says that Australian sorghum is just too expensive.”

The dynamics suggest that, “as we stand today, the new crop domestic price should be viewed as attractive”, Mr. McMeekin said.

“Anybody with a degree of production certainty should consider taking some price risk off the table.”

In fact, the US is finding sorghum exports more difficult to come by so far in 2016-17 too, with the total of actual shipments and sales on order, at 2.48m tonnes, down 54% year on year.

The total destined for China, at 1.80m ton, is down 62%, a reflection of the country’s drive to steer feed demand towards domestic grain supplies.

The downturn was reflected in US Department of Agriculture data on Thursday which, in showing sorghum stocks at 311m bushels as of the start of last month, “indicated disappearance down 30%” year on year in the September-to-November period.

An increasing volume of US sorghum supplies is reportedly being used as an alternative to corn as a raw material for making ethanol, production of which hit a record high two weeks ago.

January 13, 2017;–10338.html