Area planted28 % yoy
Tight supplies of feed grain boosted demand
2017–18 was a strong year for sorghum producers, with prices surging on the back of a tight supply and demand situation. China continued to dominate the export market, supported by the China-Australia Free Trade Agreement (ChAFTA), which eliminated tariffs on Australian sorghum.
Grain sorghum production increased 11% year-on-year to 430,000 tonnes. This increase in production was driven by an increase in area planted, up 28% year-on-year, although well below initial planting intentions1. The growing season started positively with good soil moisture balances, however unusually high summer temperatures in January, and a lack of follow-up rain, reduced yield prospects and put a cap on potential production36.
Of the sorghum produced in 2017–18, 29% was exported. The vast majority (98%) headed to China, though there was a decrease of 36% in volume year-on-year to 121,132 tonnes54. The ChAFTA, enacted in December 2015, completely eliminated tariffs on Australian sorghum.
Chinese demand for sorghum is insatiable and continually growing and, 'even in a good year, Australian sorghum supplies are merely a drop in the ocean of Chinese feed demand'72. The total Chinese consumption was estimated at 9.2 million tonnes in 2017-18, with an estimated 6.8 million tonnes used for livestock feed98.
Exports to China are largely driven by demand for Baijiu manufacture, with the balance of production working into Chinese feed rations if and when it prices against corn36. Baijiu is a Chinese spirit made from sorghum and other grains and Australian sorghum has particular quality parameters that are desirable for baijiu production. With demand at roughly five billion litres per year, it is the most consumed spirit in the world. In 2017, demand for baijiu increased 77%, reaching its fastest growth rate ever since 201163.
In February 2018, China announced temporary anti-dumping and anti-subsidy measures and imposed a 179% tariff on imports of US sorghum, effectively putting a halt on imports from the US. With the US the largest supplier of sorghum to China, this decision was viewed as a potential opportunity for Australia to boost exports22. Although the tariff was reversed in mid-May, it ‘wreaked havoc across the global feed grain market’113.
Sorghum prices were volatile but continued to surge on the back of a tight supply and demand situation, increasing 36% year-on-year (suggested grower selling prices delivered Port Kembla)49. The dry season and tight supply of feed grain bolstered demand and drove an extremely strong domestic basis.
Internationally, prices responded to news of the China and US trade dispute, peaking at $384 per tonne (delivered) in May 201849. Once US sorghum was again permitted to flow into China, the market softened.