China is once again grabbing most of the positive headlines in U.S. agriculture — and for good reason. The Asian giant has been on a historic buying spree over the last couple months, snapping up U.S. commodities of all stripes at a record pace. And despite its small size relative to other crops, the sorghum industry and the farmers who comprise it have returned to a position of preeminence in the U.S. export relationship with China.
As I write this, we’re just a couple months into the 2020-21 marketing year, yet we’ve sold 44% of the USDA export target of 260 million bushels, or 31% of the entire 371 million-bushel crop.
Furthermore, we’re seeing historic basis strength, with some sorghum farmers selling across the scales and reaping basis levels up to $1 over December corn futures. Some elevators are even bidding for 2021, owing in part to export commitments already on the books. During the week ending Sept. 26, USDA reported purchases by unknown destinations of 5.1 million bushels.
To that point, the earliest we had ever seen commitments was a week ending on Oct. 2, when Mexico purchased 275,000 bushels. By historic sorghum industry standards, a 5.1 million-bushel commitment to purchase a crop that won’t be planted for 8 months is earth-shattering.
So, what’s driving these purchases? It has to be the Phase One trade deal, right? Wrong! The Phase 1 deal has been a significant catalyst; however, China has a profound need for grain, and the U.S. is supremely situated to satiate this need.
Remember the African swine fever outbreak that wiped out half of the country’s pigs in 2019? China is now in the midst of rebuilding its swine industry, so feeders there are going to need a lot of grain very soon. Oh, and all the chickens that replaced pork in tens of millions of Chinese diets are still eating plenty of grain, as well. See what I mean about demand?
As I write this, November corn futures are trading at $9.72 per bushel on the Dalian Commodity Exchange. The last time I wrote about China, two months ago, November futures were trading at $8.19. We’re moving in a distinctly positive direction — not based on policy but based on demand. And the forward curve seen in DCE futures agrees. As I write this, September 2021 futures are trading at $9.91.
The caveat always applies that the whole world could fall apart tomorrow, and these prices could retrace by 50%. However, today, China needs grain, and the amount its merchants are willing to pay demonstrates this fact.
As exciting as the China market is for sorghum farmers today, there are still other markets around the world that could be just as important as China in the coming decades.
Take India, for example. The population in India is expected to eclipse the population in China in just a few years, and the projected peak population there will come around 2060, with a population approximately 200 million higher than the peak population in China.
India is a radically different country in many ways, but a similar pattern of increasingly westernized dietary habits is likely to occur, and the country’s demand doesn’t have to be as significant as China’s to trigger a renaissance in American agriculture.
And India is just the beginning. Populations across Africa are set to explode over the next three decades, with Nigeria, the Democratic Republic of the Congo, Ethiopia, Egypt and Tanzania all set to crack the Top 10 most populous countries on Earth by 2050. Financial and weather struggles of the past few years aside, it’s still a phenomenal time to be a farmer in the U.S.
Duff is executive vice president for National Sorghum Producers. He can be reached by email at firstname.lastname@example.org or on Twitter @sorghumduff.