Moonshine, Hogs and Drought Fuel Sorghum Boom Across U.S. Plains

March 31, 2015 07:07 AM
 
Moonshine, Hogs and Drought Fuel Sorghum Boom Across U.S. Plains

Across the Great Plains, U.S. farmers are turning to a little-known grain called sorghum for relief from a two-year slump in agriculture prices.

A kernel-yielding stalk that’s native to Africa, sorghum has three things going for it right now: it’s cheap to plant; it holds up better in drought-like conditions than other crops; and most importantly, demand is soaring in China, where farmers feed the seed to their hog herds, and moonshiners make it into a whiskey-like liquor called baijiu. While corn, soybeans and wheat slumped into bear markets last year amid a global supply glut, sorghum prices have held stable.

“As far as an alternative crop, it’s so much better than anything else right now,” said Clayton Short, a 53-year-old farmer in Assaria, Kan.

Short plans to sow sorghum on 650 acres this year, an increase of about 30 percent from 2014 and the most in the six decades that his family has been growing the grain. Overall in the U.S., sorghum plantings will climb to the most in seven years, a jump made possible in part by cutbacks on corn and cotton, a Bloomberg survey showed.

Exports of sorghum from the U.S., the world’s top grain shipper, are headed for the most in 35 years with most of it going to China, government data show. The Asian nation began tapping foreign suppliers in recent years to meet growing consumption by the world’s largest hog herd. The U.S. Grains Council estimates 10 percent of China’s imports are used to make baijiu, a 100-proof grain alcohol that is the most-consumed booze in the world.


Planting Boom

While lesser known than corn, wheat, rice and barley, sorghum is the world’s fifth-largest grain by output. Like corn, it is used mostly to feed livestock and to make ethanol, a grain-based fuel, though sorghum kernels also end up in food like couscous or popped like popcorn.

Domestic sorghum plantings will jump 14 percent to 8.148 million acres, the most since 2008, according to a Bloomberg survey of 15 analysts. That’s more than the U.S. Department of Agriculture’s projection for a 5 percent increase to 7.5 million acres. The agency will update its estimate today at noon in Washington.

Even though the crop accounts for less than 4 percent of the land devoted to corn, soybeans and wheat, its appeal increased after two years of big global harvests reduced export demand for the top U.S. grains. Prices plunged, compounding a slump in commodities fueled by surpluses in everything from crude oil to sugar.


Grain Slump

The Bloomberg Commodity Index has tumbled 27 percent in the past year, including 21 percent for corn, the biggest domestic crop, to $3.9425 a bushel in Chicago. Wheat slumped 24 percent, soybeans tumbled 34 and cotton plunged 33 percent.

Some farmers in Kansas are being offered 35 cents a bushel more for sorghum planted this spring than corn, according to Dan O’Brien, an economist at Kansas State University in Manhattan. The state is the biggest U.S. grower. The cash price for sorghum delivered in Kansas City slid 0.7 percent in the past 12 months.

China stepped up purchases of U.S. sorghum in 2013 to supplement domestic production, which the USDA expects will remain steady this season as imports surge 68 percent to 7 million metric tons, the most ever. While the nation mostly uses the crop in hog and poultry feed, distillers have been fermenting the grain into baijiu for centuries. Domestic sales of the liquor climbed about 5.5 percent in 2014 from a year earlier, Nielsen data show. Spirit makers are now seeking to sell more to Western consumers.


Local Moonshiners

“There are hundreds of baijiu brands, and they go from the very big companies all the way down to mom-and-pop distilleries in every town and city,” said Silvio Leal, the chief operating officer of ByeJoe, a company based in Stafford, Texas, that makes a lighter version of the Chinese liquor. “These can be very rudimentary, moonshine-type operations that are very small, with small volumes sold right there in the town.”

The export surge may not last. China increased buying after banning a genetically-modified strain of U.S. corn used in animal feed. The ban was lifted in December. Sorghum will average $3.68 a bushel next season, down from $3.87 in the 12 months that end Aug. 31, the University of Missouri’s Food and Agricultural Policy Research Institute said March 16.

“When a market flashes up overnight, there’s always worries about whether it’s going to stay,” said Tom Sleight, president of the U.S. Grains Council in Washington.


Dominant Exporter

The U.S. will account for 74 percent of world sorghum exports in the season started Sept. 1, compared with 15 percent for wheat, the USDA estimates.

Even if exports slow, farmers may plant more because sorghum is hearty and cheap to grow. About 28 percent of the High Plains was in moderate to extreme drought as of March 24, up from 11 percent at the start of the year, U.S. Drought Monitor data show.

It will cost $142 an acre to grow sorghum this year, including seed, fertilizer and chemicals, the USDA estimates. Cotton will be $497.26, corn $350.33, and soybeans $181.07.

John Bondurant, who owns 4,300 acres in Mississippi and Arkansas, said he’ll increase sorghum plantings fivefold to 1,000 acres, displacing soybeans and wheat. He can deliver sorghum in September at 85 cents a bushel more than corn, offering the highest return of any of his crops.

“It’s all about dollars and cents,” said Bondurant, 72, who is also the owner of Bondurant Futures Inc. in Memphis.

 

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