Sorghum and barley become grain crops de jour

Sorghum and barley have become the crops de jour for US grains farmers thanks to surging demand from China.

Those who had planted the grains have done well for themselves.

Sorghum prices are up 6 per cent in March to $246 a tonne while barley has jumped 47 per cent to $189 in March, according to World Bank data. Although grain prices tend to be closely correlated, this compares to declines of more than 20 per cent in corn over the same period.

Farmers' enthusiasm for the crops were reflected in the latest forecasts from the US Department of Agriculture on planting, showing that the prospective acres for sorghum rose 11 per cent this year to 7.9m acres while barley will see a 10 per cent increase to 3.2m acres.

The Chinese turned to sorghum and barley from 2013 as a cheaper source of feed for livestock and poultry compared to corn. The grains are not genetically modified, so there are no fears of Beijing blocking imports.

Another positive for farmers is that sorghum and barley aren't subject to import quotas and can be purchased freely by private importers. This isn't the case for corn.

Demand from China for the grains is likely to go on, as Beijing continues to try and suppress corn imports amid a domestic supply glut and high levels of inventories.

According to the UN Food and Agriculture Organization, which recently adjusted up its Chinese corn stocks by 15 per cent to 95.4m tonnes, and experts believe that the numbers could be higher by the end of the 2014-15 crop year.

Some grain traders believe that corn stock numbers - opaque at the best of times - could be as high as 120m tonnes.

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China's corn inventories have been boosted by favourable weather, which led to bumper crops in 2012 and 2013, and more importantly, Beijing's farm support policies of purchasing corn at higher domestic prices compared to the international market.

The price support encouraged domestic production as well as purchases of cheap imports as global grain markets plunged.

There are signs that domestic glut could get larger. Chinese farmers are continuing to plant corn thanks to Beijing's crop purchases despite plentiful supplies.

According to Xinhua news agency, the price of corn seeds which are resistant to cold weather have soared in the northern regions of the country.

<>In Heilongjiang Province on the border with Russia, the price of the Demeiya No 1 corn seed has more than doubled to Y1,250 per bag - one bag containing 50,000 seeds - compared to a year ago, when it cost Y500.

If the flows of foreign sorghum and barley become too heavy, they too may face the same risks as corn in facing import restrictions. Or, demand for the grains may fall away if and when Beijing stops intervening in the corn market and imports start flowing freely into the country.

"What we don't know is whether China is a permanent source of demand," says Mr Gale.

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