Global trade in grains reached an all-time high last year at 309 million metric tons (mmt), according to the International Grains Council.
But if one looks beneath the headlines, something startling jumps out…
The staple crops of corn, wheat, and soybeans all moved into bear markets price-wise last year.
Turns out the stars of the show, or – as the Financial Times calls them – the crops du jour, are two almost forgotten grains: sorghum and barley.
Why the sudden interest in these particular grains?
The answer is simple… China.
Chinese Demand Soaring
According to the U.S. Department of Agriculture (USDA), Chinese imports of the two grains soared to 11.5 mmt in the 2014-2015 crop year. In the 2010-2011 crop year, imports were only 1.7 mmt.
The USDA puts Chinese imports of sorghum at 4.8 mmt for 2015-2016. That’s a huge jump no one in the industry saw coming. Only a year ago, the USDA’s forecast for 2023-2024 sorghum imports to China was only 1.9 mmt.
Obviously, a lot has changed in the marketplace…
The USDA puts 2023-2024 imports of barley at 5.1 mmt. That’s up from the previous forecast of 2.8 mmt.
You see, China is using both of these crops as a substitute for high-priced domestic corn for feeding livestock. Sorghum is also used in the production of China’s favorite alcohol, baijiu. Malting barley is extensively used, also.
In addition, China doesn’t like genetically modified crops. But these ancient grains aren’t modified, so there aren’t any import restrictions slapped on them.
Chinese demand almost single-handedly drove U.S. exports of sorghum to highs not seen in 35 years.
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All this Chinese demand is good for farmers smart enough to plant these crops as prices continue to rise.
Sorghum – which is surprisingly priced higher than corn right now – rose 6% in March to $246 per ton, according to the World Bank. Another plus for sorghum farmers is that the crop is drought-resistant, which is a concern right now in the High Plains.
It’s also cheaper to grow. Bloomberg says that, when all is considered (seed, fertilizer, and chemicals), sorghum costs just $142 per acre. In contrast, corn costs $350 per acre.
The World Bank also said that barley rose in March to $189 per ton, up 15% this year. This isn’t surprising considering that the U.S. sowings last year were the third lowest on record. Canada’s stocks of barley also fell to a record low.
In fact, the United States has had to import supplies of malting barley from Europe, which could possibly raise the prices of domestic craft beers.
So how can the average investor participate in these hot crops?
Planting Some Investments
Well, barley is easy to invest in through futures that trade on the Intercontinental Exchange (ICE). Each contract is for 20 tons and is quoted in Canadian dollars.
There is no futures contract for sorghum. So unless you’re a farmer or a grain handler, the best bet is to own large grain traders like Archer-Daniels-Midland (ADM).
And the chase continues,