China moves forward on Brazilian sorghum market access
Soybeans aren't the only US ag commodity being hammered by the US-China trade war.
On Wednesday, Brazilian officials said China customs (GAC) has given phytosanitary approval to begin importing Brazilian sorghum (Reuters).
- Officials believe shipments could begin "in the next 60 days."
ICYMI: Xi Jinping signed off on the market access deal during his visit to Brazil in November.
- We flagged it as a signal US sorghum was in the crosshairs for trade retaliation.
Why it matters: China is the world's largest importer of sorghum, buying ~80% of global exports and roughly 90% of US exports.
- Yet US sorghum exports to China have collapsed 97% this year.
- Industry experts project US farmers could lose up to USD 100 per acre (Farm Progress).
But, but, but: Brazil can't fully replace US sorghum in the near term.
- Brazilian farmers grow roughly 5 million metric tons of the crop, but most is used domestically for livestock feeds and ethanol.
- Last year, Brazil exported less than 200,000 tons, which is just under 10% of China’s typical import volume from the US (Farm Progress).
What we’re looking out for: Will Brazil be able to exploit a massive arbitrage opportunity by exporting sorghum to China at a premium, while backfilling with cheap US sorghum to meet its domestic needs?
The bigger picture: This trade war could seriously backfire on Republican legislators from farm states when US mid-term elections roll around next year.