Sorghum prices keep falling: how should growers respond in 2014?

Since the start of 2014, sorghum prices have failed to match last year's highs and have kept falling. As of December 9, the purchase price of new-crop sorghum held at 1.00 yuan/jin, down another 11% compared with September, while the ex-factory price of old-crop cleaned grain fell by as much as 22%.

Sorghum prices keep falling in 2014: how should growers respond?

Sorghum is a type of coarse grain that can be eaten, used for brewing liquor... Because of its wide range of uses, it has long been favored by growers. Over the past year, sorghum prices climbed all the way up, also bringing growers relatively high returns, and some growers expanded their planting area this year, hoping to sell at a good price too. However, recently sorghum growers in many places have told reporters that although this year's sorghum harvest was generally good, they waited and waited until the sorghum was already stored in the warehouse, and still no buyers came, while market purchase prices also fell sharply. Why has the sorghum market this year shown a market situation completely different from previous years? How should growers reduce their losses and adjust their planting strategy?

According to a report by "Sannong China": right now, the TV drama "Red Sorghum" has just been a hit on screen. Yet it has failed to revive the sorghum price, which has been sluggish since the start of this year. Mr. Xu, a grower in Yingcheng, Hubei, told reporters that Yingcheng planted more than 3,000 mu of sorghum this year; because the market was bullish at the beginning of the year, and buyers solemnly promised them "we'll buy however much you plant," he also followed everyone else and planted nearly 300 mu. Now, the sorghum has long since been harvested and stored, yet it happens to have run into a sharp market slump, and the buyers have mysteriously "disappeared." Mr. Xu said: "It was harvested long ago, it's been sitting for 2 or 3 months, and it still can't be sold, including here in Hubei province, there's so much! We're so anxious here we have no way out. We're anxious to sell the sorghum now, and we've been left with no options!"

In fact, the situation in Yingcheng, Hubei, is not an isolated case. Not only did farmers like Old Xu, who had just tried growing sorghum, run into this year's bleak market; even some veteran growers who had grown sorghum for many years suffered a "Waterloo." Jia Xinming, a grower in Chifeng, Inner Mongolia, has grown sorghum for many years and had hoped this year would continue last year's good market; now that wish has come to nothing. He said the market change was too sudden, leaving no time to react and adjust his planting strategy. Jia Xinming said: this year there was drought, so yields couldn't rise; this year's purchase price is just over 9 mao, while the same period last year it was 1.2 yuan. There is too much imported sorghum!

It is understood that last year, affected by factors such as reduced planting area and lower output, sorghum prices once surged ahead. In Beijing alone, the wholesale price of sorghum rose by more than 60% over the year. However, since the start of 2014, the sorghum market has kept sliding. As of December 9, the purchase price of new-crop sorghum held at 1.00 yuan/jin, down another 11% compared with September, while the ex-factory price of old-crop cleaned grain fell by as much as 22%. Why has the sorghum price fallen so sharply? In response, Zhang Chao, a sorghum analyst at Zhuochuang Consulting, believes it is mainly due to a "double pincer" of international and domestic factors. Zhang Chao said: "First, China's baijiu industry has been affected by restrictions on consumption by the three public sectors as well as crackdowns on drunk driving, and so on; the baijiu industry has fallen into a deep winter, baijiu inventories are hard to draw down, rigid demand for sorghum is clearly insufficient, leaving China's sorghum struggling to find buyers. Second, it has been hit by the impact of the imported sorghum market; at present, the ex-factory prices of both U.S. sorghum and domestic sorghum remain at around 2,160 yuan/ton. But some large downstream distilleries purchase relatively large volumes of U.S. imported sorghum."

Relevant data show that U.S. sorghum imports this year could reach a historic high. Higher domestic sorghum output, plus continuously inflowing imported sorghum, has worsened the market situation of supply exceeding demand. Zhang Chao predicts that for some time to come, China's sorghum market will still not be promising: Zhang Chao believes the above bearish pressures have created certain pressure on domestic sorghum prices; at present, farmers in production areas are reluctant to sell at low prices, and in the short term prices may remain weakly stable for the time being, while continued quiet market operation later may further pull sorghum prices down.

Zhang Chao also reminded farmers that coarse grain crops such as sorghum differ from ordinary grain crops: they are not subject to state policy regulation, and there are no quota restrictions on imports; with relatively low costs, foreign sorghum will naturally flow into the domestic market. Therefore, farmers must keep a close eye on market conditions when planting. Zhang Chao said: "I think farmers should stay rational when it comes to planting coarse grains, and must not blindly follow the trend in choosing whether to plant or not, otherwise in the end it is the farmers themselves who will suffer the bitter fruit. Therefore Zhuochuang suggests farmers preferably choose contract-based planting, and also comprehensively understand later market trends, make rational judgments, so as to avoid the risk of being unable to move stockpiled goods."