Posted on Apr 06, 2017
Sorghum producers worked hard to meet growing demand for the 2016/2017 marketing year by harvesting 480 million bushels across the nation with a record-setting average yield of 77.9 bushels per acre. However, current acreage projections jeopardize the ability to meet created demand, and the U.S. sorghum supply could fall short of expectations.
Demand for the current marketing year breaks down into the following: 225 million bushels to exports, 115 million bushels to ethanol, 100 million bushels to livestock and 20 million bushels to the consumer food industry. This already totals 460 million bushels of the available 480 million bushels, yet these calculations do not include other niche markets nor the opportunity for expansion.
"We recognize and understand the current market price and local basis alone for sorghum do not necessarily indicate strong market demand," said Florentino Lopez, Sorghum Checkoff executive director. "However, we believe current export bids at the port continue to reflect strong demand for sorghum, as evident by sorghum's price exceeding the current export price for corn."
Exports remained the highest market for sorghum in the 2015/2016 marketing year, as 339 million bushels or 55 percent of U.S. sorghum was shipped internationally. The United States Department of Agriculture (USDA) estimates that 225 million bushels could be exported for the present marketing year, but current calculations and new bids for sorghum suggest exports could surpass this estimate and reach 250 million bushels. As shown in Graph 1, the sorghum export pace exceeds the five-year average for the current marketing year.
Graph 1. Sorghum Export Pace Relative to USDA Target of 225 Million Bushels
Graph 2. Sorghum Exports by Bushel and Percentage of Total Production
"The Sorghum Checkoff has worked diligently locally and abroad to establish increased and new demand for U.S. sorghum," said Jim Massey, Sorghum Checkoff board director from Robstown, Texas. "Clearly, our export market is the driving force right now, and as we expect that demand to continue to grow, it will be important for producers who are able to capitalize on this demand to give sorghum a hard look this spring."
New opportunities in China through the use of sorghum in the popular Asian drink baijiu and the expansion of marketplaces in Peru and Columbia are proving that demand for sorghum only continues to rise internationally.
Ethanol is another traditional marketplace for sorghum, and last marketing year a record 21 percent of U.S. sorghum went directly into domestic ethanol production. Sorghum demand for consumer markets continues to rise, as well. Sorghum is in over 1,000 retail food products and is an ingredient on 1.7 percent of restaurant menus, an eight-fold increase over the last three years.
“There is a steady demand for sorghum in the U.S. and an increasing demand internationally,” Lopez said. “Sorghum is unique in utilizing this much of their crop so early in the marketing year, with a continued anticipation of growing demand.”
The most recent USDA grain stocks report shows sorghum stock at 180 million bushels in all positions, or 37 percent of production. This is lower than the reported average of 44 percent, demonstrating sorghum's ability to move quickly into different markets as grain continues to be purchased. The ability of sorghum to move at an above average pace showcases its increasing demand.
Though there is evidence of growing demand for sorghum, it may still be difficult to take advantage of growing opportunities. When marketing sorghum, it is important to look at all options and each market segment available.
"Invest in someone like a marketing consultant who has the time and expertise to watch the different markets and help you analyze them," Massey said. "It can be difficult to understand the opportunities you have access to, but you must take action and capitalize on sorghum's growing opportunity."
Massey also suggests building on-site storage and waiting out for a higher price if possible. There are numerous options when it comes to marketing sorghum, but the first step is knowledge, he says. Understanding sorghum's demand, the different marketplaces and available opportunities to maximize profit are key items to consider.
The projected and current numbers showing sorghum demand provided through the USDA and other forecasts will only continue to increase over the remaining five months of the 2016/2017 marketing year, and they are estimated to continue to increase into the 2017/2018 marketing year. However, planting estimates for the next marketing year are expected to be 5.8 million acres. With such a large difference in expected production and expected demand of sorghum in the coming years, the market will see a deficit in grain, and as a result the market momentum could drop off.
"The market opportunities and the demand for sorghum exist and will only continue to grow if sorghum growers can supply the amount of needed grain," Lopez said. "Now is the time to rise to the challenge, seek out marketing opportunities, and gain knowledge of how to meet this growing demand while maintaining a profit."