Big Milo Harvest Could Compete With Corn

The prospect of a mega-sized grain sorghum crop on the Plains this fall creates a more bearish outlook on corn as the two grains compete for limited demand space in the feed grain market.

Bret Oelke, marketing management coach at Innovus Agra, LLS, in St. Cloud, Minn., says the potential for a big grain sorghum harvest following ample rainfall this summer, is adding more supply to the feed grain balance sheet in the U.S.

“It’s a direct substitute with corn,” says Oelke. “So it’s going to be in direct competition with corn as a feed grain. And quite frankly, the big yield helps the folks who get it, but it hurts the overall price situation in the feed-grain complex.”

USDA currently projects the average U.S. yield grain sorghum yield at 74.9 bu./acre, which is a steep increase from the 67.6 bu./acre grown last year. Total production, meanwhile, is estimated to expand to 574 million bushels versus the 433 million bushels harvested last year.

With production this fall expected to leap by roughly a third over last year, Oelke says that increased production is great for end users looking for cheap feed grains.

“It’s just going to add to the overall carryover and supply, which in turn will put some downward pressure, or at least a lid on any price movement that goes up,” Oelke explains.

Dan O’Brien, a K-State agricultural economist in Colby, Kan., also sees the big sorghum crop pressuring prices of other feed grains like corn, particularly in regions of the Plains where sorghum is popular in farmers’ rotations.

Kansas, the chief sorghum producer in the U.S., is expected to grow 237.8 million bushels this year while Texas, the second-largest sorghum producer, is projected to harvest 178.2 million. Combined, Kansas and Texas grow nearly three-fourths of the U.S. grain sorghum crop.

“Does grain sorghum affect corn? Yes, it does–probably where we grow grain sorghum, and that’s mainly here in Kansas and Texas and some other states,” O’Brien points out.

Sorghum not only will compete with corn for livestock and ethanol usage, he adds, but also for export demand.

The key factor in the export market, O’Brien notes, is China. Last year, cash sorghum traded at a premium to corn, thanks to a surge in sorghum purchases from China. Sorghum is back to trading at a discount now to corn across much of the Plains, but that scenario could change if the Chinese return as major sorghum buyers.

“If we have a re-ignition of some strong export demand for grain sorghum based on availability at harvest, then you’ve got grain sorghum exports substituting for what could have been for corn,” O’Brien says. “Much of the issue has to do with what China decides to do with its domestic policy with corn inventories, and if they will still allow for or retain the incentive of having their commercial grain industry finding it more profitable to import crops from outside the U.S., particularly grain sorghum.”

USDA is certainly betting on that, according to O’Brien.

In its September World Agricultural Supply and Demand Estimates, USDA pegged sorghum exports for the 2015-2016 marketing year at 430 million bushels, up sharply from last year’s 350 million bushels.

Domestic policy in China, though, could go the other way and dampen grain imports into the country.

“There are rumbles of [China] lowering the domestic support price for corn,” O’Brien cautions. “If they’re going to lower the price by 10% in their domestic support, will those same companies still find it profitable to come to the U.S. to buy sorghum or corn at a more profitable level than buying domestically? I don’t know yet.”

Source: Tanner Ehmke,

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