(Bloomberg) -- When China slapped import duties on U.S. sorghum this week, it targeted an annual trade flow worth almost $1 billion that didn’t exist five years ago.
The Asian nation made waves beginning in late 2013 when it began buying U.S. sorghum as a livestock-feed substitute for pricey domestic corn, and demand soared through 2015. While purchases have waned since, China remains America’s largest foreign market by a wide margin. Now, the trade is the latest victim of the tit-for-tat trade battle between the two countries.
“They started to buy practically all exportable supplies of sorghum from the U.S.,” said Tom Sleight, president of the U.S. Grains Council, an export group in Washington.
That’s why the new measures could quickly cause pain for American farmers. Agriculture Department Secretary Sonny Perdue blasted China’s new sorghum duties -- a whopping 179 percent charge effective Wednesday -- as "clearly a political decision." It is “ludicrious” to assert U.S. farmers are dumping supply, he said in a statement.
"We continue to greatly value our Chinese customers and what has been a win-win business relationship between U.S. sorghum producers and our Chinese partners. (Tuesday's) decision in China reflects a broader trade fight in which U.S. sorghum farmers are the victim, not the cause," said National Sorghum Producers in a prepared statement.
Importers in China are struggling to find buyers for cargoes already on their way. Some may sell back to suppliers for a discount or to Southeast Asian markets, according to Cherry Zhang, analyst at Shanghai JC Intelligence Co.
Sorghum -- a cereal used mostly for livestock feed and ethanol output -- isn’t a primary crop on American farms. Still, it’s among the world’s largest grains by production and plays a key role in U.S. Plains crop rotations. Domestic prices have slumped since China announced its anti-subsidy and anti-dumping probe in February.
In recent weeks, China also imposed a duty on U.S. pork imports and signaled it may put a tariff on soybeans -- a trade valued at $12 billion last year. While some sorghum has still been moving offshore, few new export sales have been announced since February and some cargoes have been canceled, U.S. government data show.
“In terms of those new sales or commitments, it appears that the horizon looks pretty bleak,” said Mark Welch, an economist with Texas A&M AgriLife Extension.
China may use domestic corn reserves or turn to sorghum supplies from Australia, said Will Secor, a grains economist for CoBank in Greenwood Village, Colorado. The Asian nation has offered subsidies to increase corn consumption and trim its massive stockpiles.
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