(NaturalNews) Makers of animal feed in China, which is the world's largest meat producer, are purchasing a record amount of sorghum after the government in Beijing curbed imports of U.S. GMO corn.
A survey by Bloomberg News found that imports of the coarse grain could climb to a record 3.5 million metric tons in the 12 months beginning Oct. 1, the new fiscal year, compared with a projected 3 million metric tons during the current 12-month period, according to the median of five estimates from traders and analysts. The survey said that inbound shipments included 629,634 tons in the 12 months through September 2013.
The sorghum, which is traditionally used to make baijiu liquor, such as Moutai in China, is now being used to fatten hogs and ducks, which has helped make export prices more expensive than corn, according to the U.S. Grains Council. American corn shipments to China fell to their lowest level in seven months in April following the rejection by Chinese authorities of U.S. cargoes containing an unapproved genetically modified corn variety.
'No such thing as GMO sorghum'
"Sorghum wasn't a popular commodity, yet all of the sudden China comes in and takes 3 million tons, so that doesn't leave much for everyone else," Cherry Zhang, an analyst at Shanghai JC Intelligence Co., the country's biggest animal feed researcher, told Bloomberg News.
China is expected to perhaps buy as much as three-quarters of U.S. sorghum exports this year, compared with none in 2012, the survey said.
There is no such thing as GMO sorghum, and as such, it is not subject to import quota restrictions by China. If China begins to import Argentine sorghum as well, then local prices will rise and farmers in the second-largest sorghum-producing country will increase planting, Pablo Altuna, a trader at Toepfer International, told Bloomberg News in March.
China imported 1.6 million tons of American sorghum in the seven months through March 31, surpassing Mexico as the biggest buyer of the commodity, according to data from the U.S. council.
The sorghum price in New Orleans on June 2 was $239.16 per metric ton, compared to $214.46 for corn, the council estimated. Domestic corn costs 2,530 yuan ($404) a ton at China's Shenzhen port, compared with 2,150 yuan ($364) for U.S. sorghum shipped to China today, according to Zhang's data.
More from Bloomberg:
China rejected 1.12 million tons of U.S. corn and products containing the genetically modified strain MIR 162, the General Administration of Quality Supervision, Inspection and Quarantine said April 29.
Loss of market results in loss of profits
Reuters reported that the corn that China rejected "almost assuredly" went to other buyers, but most likely at a "discount."
"It obviously is a significant cost when you add up the producer losses and the cost to exporters and others in the value chain," said National Grain and Feed Association President Randy Gordon.
One market analyst, Tim Burrack, an Iowa corn and soybean farmer who's also the former chairman of the U.S. Grains Council's trade committee, said that markets may lose $30 to $50 per ton.
Obviously, China represents a significant market, but it is not at all clear whether the country's rejection of certain types of GMO corn will cause U.S. farmers to change their crops to non-GMO strains.
Exporters and farmers going in two different directions on GMO corn underscores a new set of challenges faced by international agricultural commodity traders. Even as demand continues to grow in line with the global population, China and other countries have been slower than the U.S. to approve new types of crops amid concerns about food safety and threats to biodiversity from genetically modified organisms, or GMOs. China's curbs on some modified corn threaten to block millions of tons of imports and in so doing cut into the profits of international trading houses.
Money talks, of course. We'll see what influence, if any, losing a major market will have on American corn growers.