Maddhu Khanna, an environmental economics professor with the University of Illinois, outlined some of the latest research on SAFs from annual energy crops like energy sorghum and high-yielding perennials including miscanthus, switchgrass and energy cane.

She spoke at the International Consortium on Applied Bioeconomy Research (ICABR) conference July 11 in Saskatoon.

Based on the research to date, producing SAFs from energy crops will cost two to three times more than petroleum jet fuel, she said. It will also require either mandates that require the aviation industry to comply with high biomass or high prices for farmers to grow what could be high-risk propositions.

“A lot of those policies actually need to deal with the initial establishment cost because that is a huge part of the upfront cost of planting these energy crops and that’s what causes them to be risky,” she said.

The United States wants 100 per cent SAF, but where’s the room?

SAF researchers and entrepreneurs are already facing some stiff challenges. The U.S. hopes to increase production of SAFs, gradually reducing dependence on petroleum until 2050 when it expects the entire aviation industry to go 100 per cent SAF — a projected 35 billion gallons (132.5 billion litres) by that year.

That’s a tall order. Khanna said current SAF production is about 20 million gallons (about 76 million litres).

“That’s a significant ramp-up in production that’s needed.”

Food production for fuel in the U.S. is already at a tipping point that could compromise food production for humans. Khanna said 30 per cent of the country’s corn is already earmarked for ethanol, while about 40 per cent of its soybean oil is produced for biodiesel.

The level of SAF production the U.S. expects would require feedstocks other than human-consumable food, she said. That’s why the U.S. Department of Energy is pressing for a non-food feedstock route in its roadmap toward SAF goals, including “energy crops” grown expressly for that purpose.

Among these energy crops is energy sorghum — an annual grass that grows 14 to 15 feet every year which — according to Khannu — only needs to be planted every 10 to 15 years.

“They have a lot of very environmentally-appealing features,” she said.

“They could actually be sustainable aviation fueling that produces close to zero or negative carbon intensity. And they also can reduce nitrogen leaching.”

The question is where to grow them. A check in energy sorghum’s favour is its ability to grow on marginal land. But there’s still a problem: at some point — according to Khannu’s projections — there will be instances where it will be more productive to grow energy crops on cropland, in the process re-igniting arguments over land use.

“Bioenergy crops will be produced from an economic perspective. They will be produced somewhat on marginal land, somewhat on cropland,” she said.

Some have suggested abandoned agriculture land as a venue for energy crop growth. Aside from the fact this category barely exists in Canada’s landscape today, soil health advocates fear carbon and ecosystem service loss when switching to cropland.

“And not only are you going to lose the carbon in the soil that has already been stored, but after we convert it, it will not have the opportunity to accumulate carbon that would have otherwise been accumulated,” said Khannu.

Khannu has a partial solution to the land-use question around SAFs and energy crops.

The U.S. has a partial equilibrium economic model called BEPAM (Biofuel and Environmental Policy Analysis Model) that, when linked with a biogeochemical model, can be used to help determine where energy crops can be grown — be it cropland, marginal land or non-crop land.

The researchers discovered through BEPAM that an attempt to meet the U.S.’s 35 billion-gallon mandate using advanced biofuels would cost US$1.40 per litre of SAF in 2016 dollars (US$1.90 today according to the U.S. Inflation Calculator).

“The corresponding price of petroleum jet fuel was 34 cents per litre in 2016 dollars. So the price of SAF would be more than five times higher,” she said.

The economic model helped the researchers understand how much land would be needed to produce energy crops to meet SAF production goals and its implications for food crop prices.

“We look at all the different ways in which these feedstocks affect greenhouse gas emissions through the life cycle: the emissions from producing the crops, soil carbon effects, (how) the indirect land-use change affects the savings we get by displacing petroleum jet,” says Khannu.

From there, they calculated the net carbon impact of SAF and compared it to the GHG sequestration savings there would have been if the land was left alone.

“And so what we see here is that the carbon intensity of SAF goes down as the price of sustainable aviation fuel goes up. It allows more energy crops to be produced which have much lower carbon emission intensity.

“And so the carbon intensity of SAF goes down (and it) goes down even further as we allow non-cropland to be converted to grow energy crops.”

“To sequester carbon by allowing the land to convert into SAF feedstocks, you can actually get a much greater reduction that’s many times greater than keeping the land residence.”

Higher food prices may result

However, this process also introduces a spanner in the works: less cropland for food driving higher consumer prices.

“And because of that, corn and soybean prices will go up looking at the overall crop price index. So with a 35 million-gallon mandate, crop prices would go up … 30 per cent, so that’s kind of the trade-off that would be involved.”

All of this comes back to incentivizing farmers to grow energy crops, she said. And that will take money.

“It takes one to three years to plant and to grow them. Farmers have to commit to a crop that’s going to take 10 to 15 years to pay back and in the meantime, you’re losing the opportunity of benefits from having other crops.”

Farmers who are risk-adverse to investing in energy crops will need higher prices for biomass and SAF to be willing to produce those crops instead of corn and soybeans, said Khannu. This will raise the cost of SAF.

“So when we put all of that into the model and then we (ask) what do those supply curves look like from these crops, there is a substantial reduction in the amount of SAF that could now be produced.

“So instead of producing 120 billion litres, we’re more than 50 billion litres, so that’s when the cost (of SAFs) is going to go up because of that risk aversion.”

Breeder touts Canadian-grown energy sorghum

Energy sorghum is sold in Canada. Om Dangi, president of Agricultural Environmental Renewal Canada (AERC), points to Canadian Sweet Sorghum Hybrid (CSSH) 45 — a sorghum suitable for biofuel that can be converted into SAFs.

AERC is an Ottawa-based hybrid seed company with a focus on research, development and commercialization of environmentally-friendly and economically-promising crops, according to its website.

CSSH-45 is recommended for one-time harvesting to make silage or green chop for dairy and beef animals. The AERC website says this variety has “very high potential” for its “juice” that aids in the production of ethanol and biodiesel.

“It is grown just like sugarcane,” says Dangi, who bred the variety using conventional breeding methods.

“It’s mature in 98 days … You can extract easily 50 per cent juice through the total biomass.”

It can be grown in semi-arid areas for silage production following juice extraction.

Dangi says climate change has allowed this sorghum to be grown in places it normally couldn’t. The areas of Canada that can support CSSH-45 lie between Canada’s 43rd north latitude to its 53rd north latitude. That means it can be grown in areas from B.C. to Quebec.

– With files by Janelle Rudolph.

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Although strong demand for corn and soybeans lifted futures prices of those crops to near-decade highs, farmers said sorghum is particularly appealing this year as it is more resistant to drought.

A rally in commodity crops has been driven by Chinese imports of feed grains, as the country’s hog herd recovers from a deadly pig disease. But continued demand is uncertain as China is also trying to reduce its reliance on imported crops like corn.

“China is the joker in the deck. Maybe it even represents two jokers, because it is such a big player,” said Kent Winter, president of the Kansas Grain Sorghum Producers Association, who farms outside Wichita.

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“The perception is, it’s going to get worse, that trade is going to struggle,” said Steve Georgy, president of Allendale Inc. at Fort McHenry, Ill., analogizing that trade is like a pendulum.

“At some point it’s going to swing back, and we’re waiting to see when that is.”

He suggested markets are in the middle of that fear and panic, and it needs to play out before the pendulum can swing back.

Although the COVID-19 scare has been a major factor in recent declines, Georgy noted it’s not the only one.

Bloomberg on Feb. 19 reported China was looking to purchase sorghum from the United States, which could indicate the beginning of China’s big spending spree on U.S. agricultural goods.

Under the terms of the Phase One trade agreement, China is to purchase US$40 billion in U.S. farm products this year, but more than a month after the deal was signed those purchases have yet to start.

“It’s a good first step, but we need to see some larger products. We need to see soybeans or even pork. We just haven’t seen that type of purchase just yet,” Georgy said.

Factoring into that is Brazil’s massive soybean harvest, which has entered the export market. Georgy said China often buys soybeans from Brazil at this time of the year.

“We got this Phase One deal with China and now what? Are they really going to purchase from us or is this going to be a fight? Are we going to fight with Brazil as far as how cheap we can be?” he said, stating his belief that CBOT soybeans are already too cheap.

One factor also beginning to loom over markets is spring weather, and how it could affect planting.

Georgy said it’s still on the early side to determine how planting will be affected in the Northern Plains. However, he said, planting in Texas “has been a slow go.”

— Glen Hallick reports for MarketsFarm from Winnipeg.

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Hundreds of millions of the voracious insects have swept across Ethiopia, Somalia and Kenya in what the U.N. has called the worst outbreak in a quarter of a century, with Uganda, Eritrea and Djibouti also affected.

Authorities in those countries are already carrying out aerial spraying of pesticides, but experts say the scale of the infestation is beyond local capacity as desert locusts can travel up to 150 km in a day.

They threaten to increase food shortages in a region where up to 25 million people are reeling from three consecutive years of droughts and floods, say aid agencies.

Keith Cressman, senior locust forecasting officer at the U.N. Food and Agriculture Organization (FAO), said specially developed prototypes would be tested that can detect swarms via special sensors and adapt their speed and height accordingly.

“Nobody’s ever done this with desert locusts before. So we have no proven methodology for using drones for spraying on locusts,” said Cressman.

“There are already small atomizer sprayers made for drones. But with locusts, we just don’t know how high and how fast to fly.”

The swarms — one reportedly measuring 40 km by 60 km — have already devoured tens of thousands of hectares of crops, such as maize, sorghum and teff, and ravaged pasture for livestock.

By June, the fast-breeding locusts could grow by 500 times and move into South Sudan.

The impact on the region’s food supply could be enormous — a locust swarm of a square kilometre is able to eat the same amount of food in one day as 35,000 people, says the FAO.

Can drones work?

Climate scientists say global warming may be behind the current infestations, which have also hit parts of Iran, India and Pakistan.

Warmer seas have resulted in a rise in the frequency of cyclones in the Indian Ocean. This caused heavy downpours along the Arabian peninsula, creating ideal conditions for locust breeding in the deserts of Oman, Yemen and Saudi Arabia.

Researchers are increasingly looking to technology to help provide early warning signs and control locust outbreaks amid fears climate change could bring more cyclones.

Officials in Kenya say drones could play an important role given the limited number of aircraft.

“Every county wants an aircraft, but we have only have five at the moment and they can only be in one location at one time,” said David Mwangi, head of plant protection at Kenya’s ministry of agriculture.

“We have not used drones before, but I think it’s worth testing them as they could help.”

Existing drone models are restricted in terms of the volumes they can carry and the distances they can cover due to their size and limited battery life, say entomologists and plant protection researchers.

Another challenge for drone use in such emergencies is the lack of regulation. Many east African countries are still in the early stages of drafting laws, prohibiting usage unless in exceptional circumstances and with strict approvals.

That makes it harder to deploy larger drones, which have petrol-powered engines capable of carrying tanks of up to 1,500 litres and travelling distances of up to 500 km, and often require special approval.

Drones can also be used in the aftermath of an infestation.

“The other use case for drones is in post-disaster mapping,” said Kush Gadhia from Astral Aerial Solutions, a Kenyan firm that seeks to use drones to address development challenges.

“Governments need to know the extent of the damage afterwards. Combining larger satellite maps with smaller drone maps — which provide higher resolution images — will give more accurate assessments on the extent crop loss and health.”

— Reporting by Nita Bhalla for the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women’s and LGBT+ rights, human trafficking, property rights and climate change.

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Treasury Secretary Steven Mnuchin said the agricultural purchases could scale up to $40 billion-$50 billion annually as part of a partial trade deal, potentially more than doubling the $24 billion in agricultural and related products China purchased from the United States in 2017 (all figures US$).

Farmers, who relied on China as the top buyer for U.S. soybeans and sorghum and a key market for pork and dairy, have seen their incomes plummet during the 15-month conflict of tit-for-tat tariffs between the world’s two largest economies.

“I’m excited,” said Monte Peterson, a farmer in Valley City, North Dakota, of the first phase of a trade deal. “That’s a pretty good announcement for U.S. ag.”

It will be important for China to actually take delivery of U.S. farm products and not just announce purchases, however, Peterson said.

“We have to see it through,” he said. “We have to see it loaded and shipped out.”

At a news conference after talks with Chinese Vice Premier Liu He, U.S. President Donald Trump joked that the partial deal meant farmers “are going to have to work a lot of overtime.” Neither he nor Mnuchin gave details on which products China had promised to buy.

“We’re encouraged by the news of a trade deal with China and look forward to learning the details,” Tyson Foods spokesman Gary Mickelson said.

China imposed an additional 25 per cent retaliatory tariff on U.S. soybeans in July 2018, resulting in piles of unsold U.S. crops and dragging prices to multi-year lows. Trump has pledged a $28 billion bailout package to compensate farmers, who widely voted for him in 2016.

“Our farmers are resilient, but they need a long-term resolution to this trade war where U.S. soy can be imported into China by all importers without any retaliatory tariffs,” said Jim Sutter, CEO of the industry group U.S. Soybean Export Council.

China has mainly relied on Brazil and Argentina for soybean imports it uses to feed livestock for nearly a year and a half, but the preliminary deal could shift trade flows to the United States. Even so, South American growers said a deal would bring needed stability to global markets.

“If they reach an agreement, it will be a lot easier for Brazilian soybean farmers to make projections and calculations,” said Cayron Giacomelli, soy producer in Mato Grosso state.

China has already ramped up purchases of U.S. pork ahead of the trade talks in Washington, with the U.S. government reporting record-large weekly export sales on Thursday. Millions of Chinese pigs have died from a deadly disease in recent months, sending China on a global pork buying spree.

Big-dollar figures

Economist Bill Lapp, president of Omaha-based Advanced Economic Solutions, was skeptical of the up to $50 billion figure.

“We’ve seen these big-dollar figures before, and they don’t always come to fruition,” he said.

U.S. soybean prices climbed to the highest point since the start of the trade war ahead of the announcement on Friday. Trump said it will take up to five weeks to get a written agreement.

“We are encouraged that both sides are at the negotiating table because it is important to reopen this market for American farmers,” global commodity trader Cargill Inc said in an emailed statement.

China imported more than 13 million tonnes of U.S. soy in the 2018-19 marketing year that ended Aug. 31 and has bought nearly five million tonnes more in the current season, according to government data. The sales were far short of the 30 million tonnes or more that China imported annually from the United States before the trade war.

While Mnuchin told reporters Trump had agreed not to increase tariffs on $250 billion of Chinese goods to 30 per cent from 25 per cent, there was no mention of removing the tariffs that have been in place for over a year.

Advocacy group Farmers for Free Trade said it was too soon to celebrate a deal.

“The promise of additional ag purchases is welcome news but details on timeline, price, commodities and many other questions will have to be answered,” Brian Kuehl, co-executive director of the group, said in a statement.

— Reporting for Reuters by Tom Polansek, Karl Plume, Julie Ingwersen and Mark Weinraub in Chicago; additional reporting by Ana Mano in Sao Paulo; writing by Caroline Stauffer.

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China brought in 220,000 tonnes of sorghum in July, down 62.5 percent from 588,364 tonnes a year ago, data from the General Administration of Customs showed.

The imports were also below June’s 450,000 tonnes, when buyers scooped up U.S. cargoes amid a temporary easing of the Sino-U.S. trade tensions.

The customs figures do not give a country by country breakdown, but China imports almost all of its sorghum from the United States.

Thursday’s data also showed China took in 330,000 tonnes of corn in July, down 63.7 percent from last year. China’s wheat imports last month also slid 43.03 percent from a year earlier to 140,000 tonnes.

China imports one-third of its corn and wheat from the United States, according to customs data.

“Two factors were at play. On one hand, international prices have jumped as major producers were expecting lower output,” said Cherry Zhang, analyst with Shanghai JC Intelligence Co. Ltd.

“On the other hand, the Sino-U.S. trade war curbed buying grains from the U.S.,” Zhang said.

Corn futures in Chicago rose 7.4 percent from the day the tariffs went into effect on July 6 to the end of the month while wheat futures gained 9.8 percent over the same period.

Beijing in May dropped an anti-dumping probe on U.S. sorghum, as well as a requirement for a 178.6 percent deposit on the value of shipments, when it appeared the two countries were resolving their trade issues.

However, China on July 6 imposed 25 percent tariffs on a list of U.S. products including sorghum, corn and soybeans in response to American duties on a list of Chinese products levied earlier that day.

China brought in 600,000 tonnes of barley in July, down 16.2 percent from a year earlier, according to the data.

China’s pork imports in July were at 88,163 tonnes while sugar imports in the same month increased more than 300 percent to 250,000 tonnes, the data showed.

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Wheat turned lower after climbing to multi-month highs, and soybeans also slipped.

Chicago Board of Trade July corn settled down six cents at $4 per bushel after dipping to $3.97-1/2, its lowest since May 18 (all figures US$). July wheat ended down 6-1/2 cents at $5.36-1/2 a bushel and July soybeans fell 11 cents at $10.30-1/2 a bushel.

Corn tumbled after the U.S. said it will continue pursuing action on trade with China, days after Washington and Beijing announced a tentative solution to their dispute and suggested that tensions had cooled.

China is the world’s biggest soybean importer and the top buyer of U.S. sorghum, a feed grain that competes with corn.

The news appeared to trigger long liquidation in corn and soybeans, markets in which commodity funds hold net long positions.

A stronger dollar added to the negative tone, making U.S. grains less competitive on the world market.

“The dollar strength is a real anchor for all the trade. Then you get kicked with the China trade headlines,” said Don Roose, president of Iowa-based U.S. Commodities.

Also, traders believe the U.S. corn crop is off to a good start, overcoming early planting delays in April. After the CBOT close, the U.S. Department of Agriculture rated 79 per cent of the U.S. corn crop as good to excellent, topping a range of analyst expectations and the year-ago rating of 65 per cent.

Wheat futures followed corn and soy lower, retreating after the CBOT July contract hit a 10-month high on concerns about dry weather in Russia and elsewhere.

Forecasts for beneficial rains in the northern U.S. Plains spring wheat belt and possibly Canada added pressure.

Soybeans declined but drew underlying support from transport problems in Brazil, where a truckers’ strike has been slow to unwind, even after the government agreed to subsidize diesel prices in a bid to end protests.

Soybean exporters are considering declaring force majeure on shipments, a contractual clause that releases them from obligations because of events beyond their control, according to Anec, a trade group representing grains exporters such as Archer Daniels Midland and Louis Dreyfus.

“If it were not for the Brazilian strike woes going on, beans could be much lower than they are,” Futures International analyst Terry Reilly said.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago; additional reporting by Michael Hogan in Hamburg and Colin Packham in Sydney.

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The weather outlook also threatened to slow planting progress in the U.S. Midwest, which was supportive of corn and soybean futures.

“Heavy rainfall across portions of the northern U.S. Plains and the western Midwest will further delay spring plantings, while unfavourable dry anomalies persist in the southern U.S. Plains,” Thomson Reuters Weather Research said in a note.

The call for rains in northern areas threatened to delay spring wheat seeding, supporting MGEX spring wheat futures.

Corn futures were up 1.6 per cent following China’s move to drop its anti-dumping probe into imports of U.S. sorghum on Friday, beating a hasty retreat from a dispute that wreaked chaos across the global grain market and raised concerns about rising costs and financial damage at home.

The decision also boosted soybean futures amid hopes it signaled that a move to settle all ongoing trade disputes between Beijing and Washington would follow soon.

“The whole complex is being supported by the idea that China is showing some flexibility and talk of a potential grand bargain,” said Jim Gerlach, president of Indiana-based A/C Trading.

Chinese Vice-Premier Liu He is in Washington for talks aimed at resolving trade tensions between the world’s two largest economies.

CBOT July soft red winter wheat futures settled up 20-3/4 cents at $5.18-1/4 a bushel (all figures US$). CBOT wheat has risen for four days in a row and notched a weekly gain of 3.9 per cent.

Wheat received additional support from an Iraqi purchase of 100,000 tonnes of hard wheat, including 50,000 tonnes of U.S. supplies.

CBOT July corn futures were 7-1/4 cents higher at $4.02-1/2 a bushel.

CBOT July soybean futures were up 3-1/2 cents at $9.98-1/2 a bushel.

Strength in soybeans was tempered by a U.S. Department of Agriculture announcement that unknown buyers canceled deals to buy 949,000 tonnes of soybeans.

Soybean futures fell 0.5 per cent this week, their third straight weekly loss. Corn futures were up 1.3 per cent this week.

— Mark Weinraub is a Reuters commodities correspondent in Chicago; additional reporting by Naveen Thukral in Singapore and Nigel Hunt in London.

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The move was seen as a goodwill concession as Chinese Vice-Premier Liu He was in Washington for talks aimed at resolving trade tensions between the world’s two largest economies.

China’s commerce ministry said in a statement the investigation into a critical ingredient for animal feed and liquor had revealed that anti-dumping and anti-subsidies penalties would inflate living costs for Chinese consumers.

The investigation launched in early February had quickly showed its top trading partner how much financial pain it could inflict on U.S. farmers, analysts said. Last month, Beijing also imposed hefty anti-dumping deposits on imports of the grain.

“China has taught a lesson to the United States and showed how it can hurt U.S. exports,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

“Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the U.S. does not have much sorghum left to export. The next U.S. sorghum crop will be harvested in August.”

Agricultural products are considered one of the most powerful weapons in Beijing’s arsenal because a strike against farm exports to China would hurt mostly states that backed U.S. President Donald Trump.

The U.S. accounts for more than 90 per cent of total sorghum shipments to China, with imports from the U.S. worth just over US$1 billion last year.

The deposit scheme brought trade to a halt and disrupted supply chains worldwide, with almost two dozen ships carrying U.S. sorghum stranded at sea, as merchants and buyers scrambled to sell cargoes at big discounts elsewhere.

Frantic Chinese importers, who faced crippling extra costs to doing business, had lobbied the government to rethink the plan.

The probe had sparked worries that tariff-inflated costs for the grain would be passed onto feedmakers and eventually push retail meat prices higher.

Corn, soybean and soymeal futures fell on the news as worries over feedmakers having to find alternative ingredients eased.

The ministry said it would return the deposits it had collected. The news brought some unexpected relief to Chinese buyers who still had cargoes stuck at ports.

“This is great news! We are now saved,” said a private sorghum trader who had over 600 tonnes of U.S. sorghum stranded at a Chinese port. “We will clear our goods immediately today.”

The U.S. shipped 4.76 million tonnes of sorghum to China in 2017, worth around US$1.1 billion and making up the bulk of China’s roughly five million tonnes of imports of the grain last year, according to Chinese customs data.

Still, some traders said the ending of the sorghum probe may not be enough to entice them back to doing business with the U.S. while trade tensions remain high. Beijing still threatens to slap aggressive 25 per cent tariffs on a swath of U.S. farm goods, including sorghum and soybeans.

For many, the damage has already been done. Archer Daniels Midland warned earlier this month it will take a US$30 million hit to trading profit due to the dispute.

“The damage has been done, and mainly to the domestic buyer,” said Cherry Zhang, analyst at Shanghai JC Intelligence Co. Ltd.

“The government won’t compensate you for the losses out of reselling and demurrage.”

— Reporting for Reuters by Tony Munroe, Josephine Mason and Hallie Gu in Beijing; additional reporting by Naveen Thukral in Singapore.

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Sorghum is used to feed animals and represents a fraction of the billions of dollars of goods that move between the world’s two largest economies. The trade conflict between the U.S. and China has already hit shipments of agricultural produce and threatens to disrupt the flow of everything from steel to electronics.

China is the biggest buyer of U.S. sorghum, and the exit of Chinese buyers from the market caused sorghum prices to fall. In the U.S., ethanol companies in Kansas and Texas have moved quickly to take advantage of the cheaper sorghum prices, using it instead of corn.

They have already bought enough sorghum to operate biofuel plants through July, ethanol makers and grain traders said.

Conestoga Energy Partners bought trains full of sorghum that were initially destined for export terminals on the Texas coast, with sorghum priced at roughly 90 per cent the value of corn, said Jason Dale, a grain buyer for the company.

The company switched an ethanol plant in Texas that was running on corn to sorghum.

“We instantly purchased about 9 to 10 million bushels of sorghum that was previously unavailable, that was canceled (to China),” Dale said.

China triggered the flurry of deals by imposing deposit fees of 178.6 per cent of the value of U.S. sorghum imports earlier this month, after announcing an anti-dumping investigation on the grain in February.

That sent traders scrambling to find new buyers for supplies in the U.S. market. It also led to some of the more than 20 bulk cargoes of sorghum that were steaming toward China to change their destination after the tariff was announced.

Archer Daniels Midland, which has threatened legal action against China after several of its sorghum shipments were caught up in the dispute, said it was selling sorghum to ethanol producers.

“With regard to its own ethanol plants, ADM is reviewing the feedstock economics at some of our dry mills which might be able to use sorghum. That review is still ongoing,” company spokeswoman Jackie Anderson said in an email.

Sorghum used in ethanol pales in comparison to the amount of corn used to make biofuel. In 2017, about 100 million sorghum bushels were used to make ethanol, compared to 5.5 billion bushels of corn, according to U.S. Department of Agriculture data.

Still, ethanol producers using sorghum for biofuel are reducing corn demand.

“It will displace corn, one way or another,” an employee at a large grain processor said.

In Garden City, Kansas, where sorghum and corn compete for demand, sorghum was fetching $3.37 per bushel and corn about $3.67 per bushel last week (all figures US$). Prior to China launching the investigation, the two commodities were trading nearly at parity.

USDA had estimated total U.S. sorghum exports at about 245 million bushels in the current shipping season, accounting for about 67 per cent of the crop. A whopping 80 per cent of those exports were committed to China.

But while bargain hunters were snatching up sorghum, some of the grain intended for China might not find a new home.

Ships change course

Saudi Arabia and Spain since have purchased some of the cargoes that were previously en route for China in what would amount to record-large imports of U.S. sorghum that will be fed to poultry and livestock, grain traders told Reuters.

The bulk cargo ships “N Bonanza” and “Ocean Garlic” declared new destinations over the weekend, with both now bound for Dammam, Saudi Arabia, according to Reuters Eikon ship tracking data. A third vessel, the “Theodor Oldendorff,” changed its destination to Tarragona, Spain.

Traders were selling the sorghum at prices well below the initial sale prices, potentially resulting in losses for some global trade houses, grain traders said.

Two cargoes of sorghum loaded in Texas initially destined for China have been diverted to Spain, according to Texas agriculture commissioner Sid Miller.

The lack of genetically modified material in sorghum makes it a good choice for livestock and poultry farmers seeking to label their products GMO free, he said.

“Sorghum is kind of an easy sale because it doesn’t have a GMO presence and it can go just about everywhere,” Miller said.

Kansas-based hog producer Seaboard Corp. is also boosting its sorghum use for its animals in Oklahoma, where the crop is grown, traders said. The company did not respond to requests for comment.

Grant Morgan, a hog producer in southwest Kansas, is waiting for sorghum prices to fall further. He last fed the crop, also known as milo, to his sow herd about two years ago before China’s demand drove up prices.

“If milo was just a touch cheaper, I’d be feeding it to the sows,” Morgan said.

Seaboard feeds sorghum to hogs in part because it makes their belly fat firmer and whiter, which is preferred by customers in Japan, said Earl Roemer, who chaired the research committee for the United Sorghum Checkoff Program, an industry group.

“That’s an integral part of their ration,” said Roemer, who is now president of Nu Life Market, a Kansas-based company that sells sorghum for use in food and drinks.

Nu Life shipped its first sorghum cargo to China last year — a 21-tonne shipment that was a test for customers who use sorghum to produce the fiery Chinese liquor bijou, Roemer said. The company has orders for more shipments — including one for more than 100,000 tonnes — but they are on hold.

“The sorghum worked fantastic for the company and they want more, but not with the trading situation right now,” Roemer said. “We have to refocus more of our efforts on the domestic side now.”

— Reporting for Reuters by Michael Hirtzer and Tom Polansek; additional reporting by Karl Plume and P.J. Huffstutter in Chicago.

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