Rising Chinese imports are expected to boost sorghum prices over the next few months in the U.S., the world's largest producer, which is forecast to reap a bumper crop this year. U.S. sorghum prices are about $20 per metric ton higher than U.S. corn prices, partly due to China's buying, traders said.
Private mills in China have used up their allocated 2.88 million metric tons of corn import quotas in 2013 and are not expected to ship in more corn until the end of the year when Beijing issues quotas for 2014. Domestic corn is not a viable option as it is way more expensive than U.S. sorghum.
As an alternative, the mills have already bought about 800,000 metric tons of U.S. sorghum for shipment in the 2013-2014 year starting in September and total orders are likely to top 1 million metric tons, with prices still attractive, traders said.
China issues a fixed 7.2 million metric tons of low-tariff rate corn import quotas annually under commitments made to the World Trade Organization, of which 60 percent is for state-owned firms. Corn is the preferred feed grain for mills as it produced widely and in large quantities.
Imports of sorghum, similar in feed value to corn, are not subject to quota restrictions, and buyers need only pay a 2 percent import tax and 13 percent value-added tax on their purchases. Mills would be subject to a 65 percent import tax if they imported corn above their quota allocations.