Market Matters Blog

Sorghum S&D Shake-Up

Bell Eagle, Tennessee, used to be in the heart of cotton country. But now Richard Jameson grows corn, soybeans, wheat, cotton and, for the first time since 2004, milo.

"There is a lot, and I mean a lot, of interest in grain sorghum in the mid-south for 2015," Jameson told DTN. "I noticed, and so did other farmers I know, that the USDA enumerators did not ask us in Tennessee if we were going to plant milo this year when they called in early March."

Historically, Tennessee doesn't grow much milo, also called grain sorghum, and that's probably why enumerators didn't ask, he said.

"Using my operation as an example, my acres in milo will be 20% of my total, after not planting any since 2004," Jameson said. "The outside sales rep from the co-op told me this week that he has orders for 6,000 acres of milo in 2015 after only 1,500 last year."

In March's Prospective Planting report, USDA forecast farmers would plant 7.9 million acres to sorghum, up from 7.1 million acres in 2014. On Thursday, USDA made major revisions to sorghum's supply and demand balance sheet, cutting the ending stocks by 33%.

"USDA's April ending stocks estimate of 18 mb was bullish for sorghum and below expectations," said DTN analyst Todd Hultman said. "The risk ahead is that so much of this market depends on China's demand, and will their demand for sorghum hold up after they agreed again to accept U.S. corn?"

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China approved the biotech corn trait MIR 162, also known as Agrisure Viptera, for import last December, ending a year-long standoff that caused trade to grind to a halt. So far, current and outstanding export sales to China are a mere fraction -- 179,000 metric tons vs. 2.6 million metric tons -- of what they were before the trade disruption.

Sorghum sales are a different story. More than 5.1 million metric tons of sorghum, about 200 million bushels, have already been shipped to China. Another 1.6 mmt of sales are on the books for this year, as well as about 400,000 metric tons for the next marketing year.

USDA adjusted the supply and demand table to reflect the current pace of export demand, up 50 mb to 350 mb. USDA also lowered feed use and use for ethanol, noting that no sorghum was used for ethanol production in February.

It also made a large adjustment to the residual component of demand.

"U.S. sorghum feed and residual use for 2014-15 is projected at 85 million bushels, despite indicated feed and residual disappearance for the first half of the marketing year (September-February) of 154 million bushels," USDA stated. "Early harvested 2015-crop sorghum, particularly from Texas, is expected to augment 2014-15 marketing year supplies and support exports at 350 million bushels during the 2014-15 marketing year that ends August 31.

"The Prospective Plantings report indicated that Texas producers intend to increase sorghum plantings by 20 percent for 2015. Last year, more than 80 percent of the Texas sorghum crop was mature by mid-August. These additional supplies, exported before the September 1 start of the new marketing year, push feed and residual use during the second half of 2014-15 (March-August) well into negative territory. These supplies will also boost first-quarter (September-November) feed and residual disappearance in the 2015-16 marketing year, as in 2014-15."

Back in Tennessee, Jameson said it's been so rainy and wet that corn planting is delayed -- just 2% compared to the five-year average of 10% planted as of April 6. It's giving Jameson, and his neighboring farmers, extra time to reconsider their crop mix for 2015.

Hultman and DTN Senior Analyst Darin Newsom agree that given the risks (relying almost solely on China's purchases), it's still worth planting milo this year.

Newsom added: "especially if you can lock in a strong new-crop basis early and let the futures market (try to) rally this spring."

Katie Micik can be reached at katie.micik@dtn.com

Follow Katie Micik on Twitter @KatieMDTN

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