Don't expect an even higher demand for sorghum

[luisvieira]

Hello boys,

In my day two of reporting in China, I found out some things that you might get interested on. Most of you may have noticed that the Chinese demand has grown over five times in the last few years. But the ones that got attract to plant it now need to hear a warning. The demand for feed meal, which generated demand for sorhum, has slowed down in China and that might continue to happen. Two analysts told me that another factor influencing a smaller increase on sorghum purchases is that production has jumped domestically for the very same reason it happens in the U.S.: lower costs compared to corn. And that might push the preference of buyers to buy domestically in China and an imposition of quotas.

So, how do you assess these forecasts?

[sw363535]

Thanks Luis,

We greatly appreciate your observations on this trip in China...

That is a common factor for sorghum....a crop that fills the gap when corn is short in feed and ethanol......

Corn has an economics problem.  as you say... Seed companies here have moved to corner much of the milo seed market and have been actively driving the cost of seed up for a couple of years.... to fight the expectation of loosing corn acres...

Cattle prices are high enough that acres will be lost to livestock forage.... but probably not in high numbers..... the cattle inventory is still low..

Thanks again

[marketeye]

Luis,

Does this also mean that China is going to need less corn from the U.S.? If they are leaning towards growing and feeding more sorghum, they won't need as much corn, right? Did the analysts say anything to that point?

Thanks for the update from China. It is greatly appreciated.

Mike

[bkadds]

Mike--I thought China wasn't buying any corn anyway due to whatever the issue of the day is/was. Always seems as if some are looking at particularly corn through bearish glasses no matter what the overall situation maybe. A 40 cent rally in reality is very little in the overall scope of things and some would think one should liquidate all their inventory and thank the market for one last opportunity.

[luisvieira]

Mike,

They say that sooner or later the government will decide to use the reserve stocks of corn, estimated at 150 million tons. The government has these reserves for the case of drought or something similar, but it seems that the Chinese crop is doing well and production will be similar to last year's output.

[marketeye]

GAIN reported Wednesday that China's corn production is looking like a record in 2015.

Forecast MY2015/16 corn production is revised slightly higher, while forecast rice and wheat production are lowered slightly.
Production of all three grains is still forecast at record or near record levels, resulting in continued growth in government stocks.
Wheat feed and residual is adjusted lower for the past three years, as wheat has become less competitive as a feed ingredient.
Corn consumption is mixed; feed use is forecast lower but industrial consumption is raised as the government promotes industrial use of deteriorated corn stocks.
MY2015/16 sorghum imports are still forecast at a record 9 million tons based on strong demand for cheaper alternative feed ingredients.

Forecast MY2015/16 wheat production is revised down two million tons to 128 million tons due toslightly lower than expected acreage growth.
Total wheat consumption in MY 2015/16 is forecast at 116.5 million tons on declining feed use in recent years as wheat became more expensive than corn.
Corn production in MY2015/16 is forecast at 230 million tons, up two million tons on higher acreage as corn continues to eat into cotton acreage.
Forecast MY2015/16 corn consumption is revised up one million tons to 221 million tons as strong growth in industrial usage offset a decline in feed.
Corn ending stocks in MY2015/16 are forecast at 93 million tons as high support prices push up production and suppress demand.
Forecast MY2015/16 rough rice production is revised slightly lower to 206.4 million tons due to less optimistic yield projections.
Estimated MY 2014/15 rice imports are revised down 400,000 tons to four million tons due to the delayed release of rice tariff rate quotas (TRQ) in 2015.
MY2015/16 sorghum imports are still forecast at a record 9 million tons based on strong demand for cheaper alternative feed ingredients.

Does it look like China is finding a way to produce more and more corn?

Mike