GRAIN RECAPS
Full circle
Mexico to top China’s sorghum imports
A
By Joe Kelley
recent AGWEEK article,
sourced from Reuters Media
in October 2015, states that
Mexico is poised to be the
number one importer of
grain sorghum for 2016. The aggressive
buying actions of China over the past
year or more, which saw grain sorghum
trading at a premium to yellow corn,
has softened greatly.
Today, China has modified its domestic grain policies in such a way that
the country plans on utilizing a large
portion of its grain reserves — which
it has built up over the past 10 years or
so — to be used for both domestic feed
consumption and ethanol production.
According to U.S. sources, it is estimated that approximately 30 percent
of China’s stockpiled yellow corn from
domestic production is in such bad
quality that ethanol production is about
the only thing the corn is good for.
Obviously, China switching over to its
domestic stockpile has displaced bushels from being purchased from U.S. In
fact, we have already begun to see that
China is importing less corn and, for all
practical purposes, stopped the importing of DDGS into the country.
However, China still has grain sor10
ghum bushels booked through 2016.
It is believed by some of the U.S. trade
associations that although China will
not be buying at the frenzied pace of
the past year or so, it will remain a consumer of U.S. grain sorghum.
This change in events brings the
sorghum story full circle. With China
not as strong of a buyer of U.S. grain
sorghum as it once was, prices for grain
sorghum are expected to get back to
“pre-China” levels. The expectations
are that the number one buyer for grain
sorghum will revert back to Mexico —
a country that has a long and successful relationship in sourcing U.S. grain
sorghum to supplement its domestic
grain sorghum crop. Over the past few
months, we have seen Mexico step up
to the plate on grain sorghum purchases, as the Mexican crop was hit hard by
sugar cane aphids this past harvest.
Another key factor in support of
Mexico’s continued purchase of grain
sorghum comes from the recent developments with the Mexican Government and PEMEX, the state-owned oil
company. Mexico is enacting its own
ethanol program, which is expected to
replace about 10 percent of the gasoline
in the coming years with ethanol. The
source of the ethanol is mandated to
come from either sugar cane, which is
a big domestic crop for Mexico, and/or
grain sorghum, as the Mexican government will not allow corn to be used for
ethanol production.
In fact, it appears that Mexico is
fairly far along in its plans, as PEMEX
has already awarded some multiyear production contracts to various
companies in Mexico, including groups
consisting of Mexican farmer cooperatives. Tentative plans call for an ethanol
facility to be built in Tamaulipas state at
a location about 18 miles south of Progreso, Texas. Progreso, Texas, is a major
truck crossing point for Mexican trucks
to enter the U.S. and load grain.
It is expected that Mexico will not
be able to supply enough grain sorghum with its own stocks of sugar and
grain sorghum even in good years,
and it is not expected that the Lower
Rio Grande Valley will have enough
bushels to meet this new anticipated
need and keep up with demand from
its traditional grain end-use customers,
such as beef feedlots, poultry, etc., so
it is expected that grain sorghum will
be sourced from points farther north
along the Texas Gulf Coast to stem the
anticipated need.
Of course, this should be seen as good
news for sorghum producers in Texas.