(Bloomberg) -- Bids for sorghum in the Gulf of Mexico have almost disappeared after China’s decision earlier this week to impose a 179 percent tariff on U.S. imports, according to grain-handling company Scoular Co.
“There’s been very little trade,” Bob Ludington, who oversees Omaha-based Scoular’s North America grain and oilseed division, said in an interview Thursday. While some U.S. grain elevators are still bidding for sorghum, “nobody is looking” for it in the Gulf, he said.
Scoular has elevators in Kansas that buy crops including sorghum. The company then ships supplies around the U.S. as well as to Mexico and exporters in the Gulf.
China has been the biggest importer of U.S. supplies. When the Asian country announced an investigation into American shipments in February, sorghum prices dropped on speculation that tariffs would be imposed, erasing the premium the grain had fetched over corn prices in Kansas.
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.
Now that the tariffs are here, sorghum prices relative to corn must drop to attract domestic as well as international customers, said Ludington, who is based in Overland Park, Kansas.
Sorghum is fed to livestock and poultry and is also used to make ethanol. It has been priced out of the U.S. animal-feed market because of strong Chinese demand over the last few years, Ludington said. Where U.S. supplies may go now isn’t certain, but Mexico may be a potential destination, he said.
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