Even in the toughest of times, the on-the-ground presence around the world and rapid response by U.S. Grains Council (USGC) staff can turn a crisis into an opportunity to build lasting markets.
Twenty vessels of U.S. sorghum were in transit to China when the country announced an immediate 178.6 percent preliminary anti-dumping duty on U.S. sorghum on April 18, 2018. The Council, as the export market development organization for the U.S. sorghum industry, went immediately to work – fielding calls by members and international customers looking for alternative markets for these sorghum shipments.
Buyers responded just as quickly to the situation and vessels were re-routed, albeit at a significantly discounted price, to markets including Spain, Saudi Arabia and many others. Now, the U.S. Department of Agriculture (USDA) is reporting new sales of U.S. sorghum to even more markets, thanks in large part to the Council’s efforts to prepare and keep buyers informed of the sorghum situation.
“The intense efforts of the Council’s global network to find alternative markets for U.S. sorghum demonstrates how responsive we are as an organization,” said Deb Keller, USGC chairman and farmer from Iowa. “This work is emblematic of who we are and what we have done since the organization was founded in 1960.
“This is the Council doing what it does best and we are very proud of it.”
Sorghum has served as a cornerstone commodity of the Council since the organization’s inception. Since that time, the Council has worked to develop worldwide markets for U.S. sorghum, resulting in a long list of countries with experience using the coarse grain, including Japan, Spain, Saudi Arabia, South Korea, Morocco and Mexico.
For example, U.S. sorghum producers from Kansas and Texas tapped into logistical advantages during a direct sales mission to Mexico organized by the Council and the United Sorghum Checkoff Program (USCP) in June 2017. The duty-free provisions in the North American Free Trade Agreement (NAFTA) have led to increasingly-integrated logistics for the grain trade in the second largest market for U.S. sorghum. Mexican end-users now prefer U.S. sorghum over local sorghum supplies for high-protein, quality feed, but the U.S. grain also must compete on price.
Japan and Spain have been long-time, significant markets for U.S. sorghum. However, in recent years, they have not purchased substantial quantities of U.S. sorghum due to strong demand by Chinese importers. Nevertheless, the Council has continued to maintain contacts in these countries.
The Council’s long history working in China prepared the organization for the threat of another market shutdown. As a result, when China announced investigations against U.S. sorghum in February 2018, the Council had already laid the groundwork and immediately sprang into action to find potential alternative markets.
The Council worked with the Texas Grain Sorghum Producers Board and Association and the Texas Department of Agriculture to immediately redirect a trade team of U.S. farmers and agribusiness members to Spain from their originally scheduled visit to China. In March 2018, the team of six engaged with Spanish importers and end-users to promote the return of U.S. sorghum to the Iberian Peninsula. The delegation included a sorghum farmer from the Texas Panhandle and grain traders as well as representatives from farm cooperatives, the ethanol industry and the Texas Department of Agriculture.
“Spain knows U.S. sorghum,” said Alvaro Cordero, USGC manager of global trade, who participated in the overseas mission. “We wanted to make sure they were fully aware of the market opportunity and ensure, when prices were right, Spain would be the first country to buy U.S. sorghum.”
The delegation spoke during two conferences in Barcelona and Madrid. Eighty Spanish end-users, feed millers and traders attended the conference in Barcelona at La Llotja Grain Exchange, the oldest grain exchange in Europe, while 35 participants attended the second conference in Madrid at the Federation of Agri-Food Cooperatives and Traders. The delegation provided the Spanish audience real-time information on the U.S. sorghum crop and the outlook for prices. The group also answered questions from participants about logistics and timing of the crop.
“The message was very down to earth and clear,” Cordero said. “We explained the situation of what is going on with the industry and prepared the ground in case China walked out of the market because of tariffs.”
The Council continued to monitor developments and provide information to Spanish grain buyers after the trip concluded. When the sorghum tariff was announced by China, Spanish customers were among the first the Council contacted. Since the Chinese announcement, the Spanish market has purchased 430,000 tons (16.9 million bushels) of U.S. sorghum, including the shipments diverted from China and 49,500 tons (1.95 million bushels) of new sales of U.S. sorghum.
Elsewhere in the world, Cordero and Ramy Taieb, USGC regional director for the Middle East and North Africa, were on the ground in Saudi Arabia the week the new tariff was announced. Building on existing engagement in the market, the pair met with buyers to discuss the distressed sorghum vessels and how U.S. sorghum could help meet Saudi Arabia’s growing feed demand.
The Saudi Arabian market is no stranger to U.S. sorghum. The Council regularly brings teams of Saudi buyers to the United States to learn more about U.S. sorghum production, quality and logistics.
After the meetings in April, seven Panamax shipments of U.S. sorghum, equaling about 500,000 tons (19.6 million bushels), were re-routed to Saudi Arabia. The two shipments of U.S. sorghum arrived at Saudi ports on May 5 and the subsequent vessels will discharge at the pace of two every two weeks.
“There is significant interest in sorghum from local buyers,” Taieb said. “They see an opportunity on not only price, but also an alternative coarse grain they can use and easily adapt to their processes.”
In addition to these large markets, the Council continues to highlight the economic and nutritional advantages of U.S. sorghum to buyers, as the organization has done since the beginning. The Council has distributed the latest USCP feeding guidelines for sorghum and is talking candidly and frequently with customers to promote the coarse grain. The Council is aware of U.S. sorghum sales to the Philippines, Japan and South Korea. New sales are also now being reported to markets including Colombia and Taiwan.
“All of these sales represent an opportunity to turn these markets into future, consistent buyers of U.S. sorghum,” Keller said. “The Council’s sorghum promotion is not only helping find homes for the displaced Chinese shipments, but also driving new demand for the upcoming crop.”
Back in the United States, representatives from the Council and the National Sorghum Producers are also in ongoing conversations with the Office of the U.S. Trade Representative (USTR) and USDA’s Foreign Agricultural Service (FAS) on responses to Chinese duties and new programming that could mitigate its long-term impacts on the sorghum industry.
The cumulative results of these direct conversations and information-sharing with end-users as the Chinese sorghum tariff situation continues to unfold embodies the work the Council does 24 hours a day, seven days a week, 365 days of the year, on behalf of U.S. farmers and agribusinesses – to develop markets, enable trade and improve lives.
About The U.S. Grains Council
The U.S. Grains Council develops export markets for U.S. barley, corn, sorghum and related products including distiller’s dried grains with solubles (DDGS) and ethanol. With full-time presence in 28 locations, the Council operates programs in more than 50 countries and the European Union. The Council believes exports are vital to global economic development and to U.S. agriculture’s profitability. Detailed information about the Council and its programs is online at www.grains.org.